StockWatch (Feb 09-13, 2009): PSEi, MWC, JGS, BPI

PSEi (Chart: Daily Resistance: 2004/2068/2200 Support: 1818)

The index made an unexpected rally on the last 2 days of trading last week. The index had a white candle with a very small wicker accompanied with large volume. This suggests strength possibly for the short term only. Another remarkable action last week, is that the index is now above the 65 day MA. Judging from the RSI and the stochastics, there is still a little bit room for upward movement before the rally gets capped. Hopefully, the large volume last week could sustain further upward movement this week. The rally was definitely a welcome sight for the index as it prevented the index from forming lower lows.

Watchout for resistance at 2004/2068, these are previous high on the chart, while 2200 is the 130day MA level. It is highly possible that after the rally, there will once again be a short sideward movement before it moves down, which has been the pattern since November 2008. Once the index starts to move sideways again, this would be the best time to cash in on your gains.

There is still no reversal pattern seen in the charts and it looks like the index will continue to move within a range.

MWC(Chart: Daily Resistance: 12.50/12.75 Support: 11.00/9.50)

I was wrong in assuming that this would be a fast trade. As it turned out, it took more than a week before the rally last Jan 23 continued. This got me worried a bit, but the low volume on the days where the stock went down provided some consolation that the selling action is week and that there is still a possibility of a continuation of the rally. From last week’s trade, patience paid off when the stock continued its rally towards 12.50. It seems to be a result of a breakout of a small symmetrical triangle, or if you would consider, a pennant formation with the pole from Jan 23. Both of the pattern’s target price is already reached and it also has touched resistance at 12.50. There may still be room for a little more upward movement as the RSI and stochastics seems to suggest. But I would rather sell for now and observe how the stock would play for the following days. A gap and breakdown with large volume last Jan 16 isn’t easy to ignore. I believe that it would take more than the volume from last week’s rally for the stock to be able to move past the gap, so volume is an important indicator of where the stock would go. If by next week volume doesn’t pick-up, the rally/re-test of previous support-turned-resistance line would fail to move further upward.

JGS (Chart: Daily Resistance: 3.00 Support: 1.58)

JGS seems to be forming a rounding bottom. However, there is not much volume towards the other end of the rounding bottom. Rounding bottoms usually have large volumes on both ends of the pattern. It looks like this will encounter resistance anytime soon as RSI is now in the over bought level. Watchout for this stock as it may form another rounding bottom and possibly result in a double bottom formation. But this would take another 3-4 months before this gets fully realized

BPI (Chart: Daily Resistance: 38 Support: 33.50)

BPI had some promising move last week. Trading last Friday closed the gap that was formed last Jan 29 with volume and also forming a gap-up. This gap up gave way to the formation of an island reversal from the recent downward movement since the start of 2009. However, there is an upcoming resistance at 38, which is the 65 day MA, so volume needs to pickup for next week for it to be able to sucessfully move past the resistance.

Also, there is another promising pattern forming for BPI. Looking at the weekly chart(see inset picture), it seems that the stock has touched support from previous low last Jul 2008, which is a possible double bottom formation. Volume last week was relatively large compared to the successive white candles last Jul 2008 from the weekly chart, which suggests a very good support. Ofcourse it is too early for a break-out, but the opportunity of taking advantage of the formation of the upward leg of the possible double bottom is very enticing, so it is best to exercise caution if you intend to ride the leg. If you got in at 36.50 and volume thins out at 38.00, then it would be best to get out of the stock.