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.