StockWatch (Dec 19-23, 2011): PSEi, CEB, MEG

PSEi (Chart: Daily  Resistance: 4340/4390  Support: 4260/4200)

Looks like the index is making a very wide sideways movement as evidenced by the 6 trading weeks where the index is just moving within 4340 and 4200.  This is probably as expected because if the head and shoulder formation is to be taken into consideration, the right shoulder may be completed within the same amount of time. The left shoulder took about 5-6 months to form, so taking cues from there; the right shoulder might also span that long before it gets realized.  Currently, we are now into the 3rd month since the right shoulder bounced from the low last Sep 26, so we probably have another 2-3 months before the right shoulder gets realized. 

I would suggest to keenly observe the channel (parallel lines) between 4390 and 4200. A breach below 4200 line may indicate the start of the downward movement for the index and the realization of the head and shoulder formation.

For next week, the index would most probably continue to move sideways to upward, still within the range of the channel.

CEB (Chart: Daily  Resistance: 67  Support: 62 )

CEB’s chart looks very depressing as it has been on a downward trend since its IPO last 2010.   However, even though this stock is depressing, there is a sliver of light for this stock as last week as volume has spiked on the last three trading days. 

The increase in volume might be a sign of capitulation for this stock as those that have been holding on long for this stock may have given up and has started to sell their positions at a loss. Bargain hunters on the other hand, as evidenced by the volume, are very much welcoming the opportunity of buying this stock at a low price.

Looking at the Relative Strength Index (RSI, 3^rd chart from the bottom), the stock is now way oversold, even going below 20 level.  Usually an RSI of 30 means the stock is oversold, but in this stock’s case, this is way too oversold.  So for a stock that is way too oversold, the next possible move on this stock is a bounce from the low.    This stock would definitely provide you with some gains for the short term. 

You can buy at the current level of 63.15 and sell near 70 for a decent 9+% gain.

For those who wouldn’t mind going on long term hold for this stock, I believe that this stock is also good for the long term, as this stock has nowhere to go but up.

MEG(Chart: Daily      Resistance: 1.75   Support: 1.66/1.51/1.47)

MEG is one stock that you need to avoid for the mean time.   As of last week’s trading action, MEG has completely formed and broken a head-and-shoulders formation.  The downward target price for this area formation is near 1.47.  It can also be seen that the break down from the neckline was accompanied by large volume, so this means the break down is credible, not just an event created by a few sellers.

For next week, expect the stock price to move sideways to upward. This stock may retrace its previous price levels and may fall short of moving past the resistance at 1.75.  After which, it may  continue its downward movement.   If the retracing happens next week, this would be the best time to unload your positions for this stock.

StockWatch (Dec 05-09, 2011): PSEi, MPI, LC, LCB

PSEi (Chart: Daily      Resistance: 4340/4390            Support: 4200)

The support for 4200 held its ground last week and has prevented the index from crossing below that support level.  The lowest that the index dived is at around 4211, just a few points away from the previous low at 4207.  Bullishness went back to the index as it gapped up on trading last Thursday and continued on to Friday.

Looking at the value turnover on the lowest index level for last week, there was considerable increase in value turnover for the black candle formed last Tuesday.  This however was countered by an almost same value turnover on Thursday, the day when the index gapped up.  We can see here that bullish sentiment was able to reverse the effects of the trading last Tuesday and somehow was able to maintain its level.

The bullishness will definitely continue next week with an upward to sideways movement, but its strength is something that one should closely monitor as it approaches the previous highs at 4340 and 4390.  It is possible that the index is just moving in a wide sideways movement between 4200 and 4390.  Remember that there is still the possibility of the index forming a big head-and-shoulder formation (neck line at the low of Feb and Sep 2011) and the ranging movement may just be part of the bigger picture.

Another thing to look out for the coming days is the formation of a small head-and-shoulder area pattern.  Possible necklines have been established on Nov 3 and Nov 29.  The only thing missing from the area pattern is the right shoulder.  If resistance level at 4340 proves to be strong, then this might aid in fulfilling the area pattern.  The possible target level for this area pattern is near 4000 level.

MPI (Chart: Daily       Resistance: 3.60/3.75  Support: 3.41)

MPI has been moving upwards since October and what is remarkable about this stock is that volume on most of the days when white candle is created is exceptionally high.  Also comparing the volume prior to October, we can see that there is a lot of action in this stock from October onwards which means there is an established bullish sentiment for this stock.  The only area pattern that could be deduced from the chart is the upward channel, which confirms the bullishness of this stock. 

Last Friday’s trading once again triggered a bullish sentiment for this stock as it registered relatively high volume. So for next week, we may be in for the continuation of this bullishness if current support holds. 

Immediate resistance for this stock is near 3.60 which is the resistance line from the peak of July and peak of Nov.  If the stock surpasses that level, then next resistance will be near 3.75 which is the upper line of the channel or the resistance line of the current upward movement.

LC (Chart: Daily         Resistance: 1.82          Support: 1.35)

LCB (Chart: Daily      Resistance: 1.90          Support: 1.45)

Both LC and LCB have been in a bullish mode for the past weeks and as of last Friday, it has again registered high volume on the white candle.  There is no doubt about it that these stocks are on the run, but a possible resistance may put a stop to this bull run. And this possible party pooper is the previous high from Aug at 1.82 for LC and 1.92 for LCB.  Those resistance levels are definitely something that one would need to observe. 

One thing is for sure, whether or not the resistance levels prove to be strong, you should be on the lookout for signs of weakness like longer wicker for white candles and decreasing volume on the upward movement considering that both stocks are now way beyond over bought level.