StockWatch (Jul 07-11, 2008): PSEi, LR, RLC, DGTL

PSEi Weekly Chart

PSEi (Chart: Daily Resistance: 2425-2400 Support: 2289/2100)

The support line from Jan 2008 was tested for the 5th time last week and it was not able to contain the index’s downward move. The index, punched thru the support line moving downwards up to the lowest at 2289. Looking at the weekly chart, we can see that there was a support at that level, which was the 260-MA on the weekly chart at 2300. However, this may just be a temporary support for the index as judging from the break down from the channel, there is a possibility that the index could still move lower towards the downward channel’s target price near 2100. Last Friday’s upward move may just be a short rally as there was no volume to support the upward movement. Still trading strategy would be to keep liquid. No signs of reversal can be seen from the charts.

Note: There are a lot of stocks that are very much oversold, be careful on trading these stocks, as any upward move might just be a short rally from being very oversold. If you are to trade these kinds of stocks, keep an eye on your stops as the market is still very bearish.

LR (Chart: Daily Resistance: 2.80 Support: 2.24/2.06)

LR seems to be a promising stock to follow. The stock had a large spread and large volume last Friday. Also worth noting is the price which is now above the 3 moving averages. This denotes strength for the stock. Looking also at the MACD, the MACD is now above the zero line and now poised to cross above the signal line, both signs also indicate strength in the stock. But how long can this strength last is another question that may not have a definite answer. As of now, resistance is at 2.80, which is the previous high. We can assume for now that the strength that we are seeing can take this stock from 2.60 to 2.80, beyond that is still a wait and see. I am more inclined to call that 2.80 will be a strong resistance, judging from the RSI which is now near overbought.

RLC (Chart: Daily Resistance: 6.30-6.60/ 9.50 Support: 6.0)

RLC is one of those stocks that are very much oversold. What caught my attention for this stock is the unusual large volume last Friday which may translate to a strong support at 6.00. Resistance is currently at 6.30-6.60 which is the gap down formed last Thursday. If you are to trade this stock, keep track of your stops. It is possible that the stock may reach beyond 8.00, based only from the 38.2% fib retracement, which is at 8.30.

DGTL (Chart: Daily Resistance: 1.46 Support: 1.24)

Comparing DGTL with the PSEi, DGTL seems to be in a better position than the index. As we can see, the recent downward movement of the stock is not really part of a bearish cycle, but more part of the consolidation that is happening for this stock. Looking at the chart, we can see that the MACD has been oscillating near the zero line which indicates consolidation and it is also evident on the price action. Currently there is an upcoming support at 1.24; it would be good if the stock is able to stay above this support line from Sept 2004. Otherwise, if the stock moves lower than the support line, then this might probably be the end of the consolidation phase for this stock and may move to a bearish phase. But judging again from the RSI which is very much oversold, it is highly probable that the support at 1.24 may hold.

In Retrospect: RLC

RLC

Support at 11.25 stood its ground last week, giving more probability to a possible double bottom. As of current 11.50 is a good support which can be an entry price, cut loss if it goes to 11. If the resistance at 12.25 is broken, there is a possible upside of up to 14 – 15.

StockWatch (Feb 25-29, 2008): PSEi, RLC, MEG

PSEi (Chart: Daily Resistance: 3170/ 3320 Support: 3000/2950)

The initial descending triangle formation that was spotted last week was broken down on the first day of trading but was able to recoup the loss and successfully close above the support line of 3170. However the support at 3170 was short lived as the index broke down last Friday with a huge spread. The TP for the breakdown is around 3000, which is also a psychological support. The next support is at 2950, the previous low. The interesting part is that if support at 2950-3000 holds, then the index is a possible candidate for a double bottom, a reversal indicator from the recent decline of the stock market from October 2007, but ofcourse this remains to be seen. The bad part of it is that if support doesn’t hold, and proceeds to takeout the support at 2870 from the previous low of August 2007, then we have ourselves a grim picture of a breakdown from a double top, but judging from the RSI level, I think the grim picture of a breakdown from a double top would be very small as the index is still currently near oversold level. For now, the trading strategy would be more of staying on the sidelines until a bounce happens. Keep watch also for other stocks that might be forming a double bottom, a falling wedge pattern or showing signs of a bullish divergence.


RLC (Chart: Daily Resistance: 12/14.50 Support: 11.25/10.50)

RLC is one of those stocks that are displaying a double bottom formation. Looking at its past movement, we can see that it has formed a H&S formation from Sept-Dec of 2007. It brokedown from this formation by the second week of December and has since been moving downwards. The target price of the breakdown from the H&S formation has been reached at 11.25 and was able to rally back to a high of 14.50 before moving downwards again. Currently, it seems that this stock might be forming a double bottom assuming that support at 11.25 holds. If support at 11.25 is broken, the next support is at 10.25 which is the support line extending from Aug 2007 up to Jan 2008. If it bounces from this support line, watch out for a bullish divergence formation for the MACD and RSI. As of the moment, both of the indicators still has the possibility of forming a bullish divergence. If it does bounce from support at 10.50, this gives more credibility to a possible falling wedge formation with resistance at around 12. For the bottom fishers, 10.50 would be a better level to get in and cutting immediately if it goes below 10.

MEG (Chart: Daily Resistance 2.44 Support: 2.20/1.90)

MEG is also one of those stocks that may be displaying signs of bullish divergence. Looking at the previous movements, the stock brokedown from a symmetrical triangle (or could also be a H&S formation) last Jan 2008 and has since been moving downward. From mid January, the price action moved sideways and as of last Friday it has recently broken down again from the sideward channel. Considering the symmetrical triangle where it initially brokedown from, it has now reached the TP of 2.20. But considering the sideways channel where it recently brokedown, we can still see further possible downward movement down to the 1.90 level. As of current this is a candidate for a bullish divergence as the price has formed a lower low, while the MACD and RSI is still way too far from creating lower lows, which means there is a higher possibility for the MACD and RSI to form a higher low. We can confirm the bullish divergence by an MACD crossover of the signal line.