StockWatch (Jun 25-29, 2012): PSEi, MEG

 PSEi (Chart: Daily      Resistance: 5156         Support: 4964)

Events from last week’s trading was positive, with the index regaining its loses from the previous week. 

We can now see a possible slight upward shift in the sideways movement of the index as it was able to create a new high since the major downward trend that happened last May.  Albeit slightly upward, this is still a sideways movement for the index ranging between approximately 5156 and 4964.

There are no negative divergences that can be seen from the chart; both MACD and RSI are in-synch with the movement of the index.

The index has now established a pattern, that of a sideways movement, and it is currently following resistances and support areas.  So for the coming weeks, range trading strategy is recommended.

MEG (Chart: Daily     Resistance: 2.26          Support: 1.90)

MEG caught my attention because of a very noticeable volume and price pattern.  The ongoing trading action for MEG seems to be forming a cup and handle formation, with volume increasing as the right side of the cup is being formed.  

With the inability of the stock to support further upward movement last Friday, this may signal the start of the handle formation.

Generally a cup and handle formation is a bullish continuation pattern. Considering the recent upward trading activity in MEG since the start of the year, we may be seeing the return of MEG towards the previous high created last Nov 2010.   However, there are still a lot of resistance levels that it needs to overcome, but nonetheless, MEG is slowly knocking out one level at a time.

If the cup and handle formation does materialize, it has a potential upward target price of 2.55, slightly just above another resistance level at 2.48.