SMC - SwimMing against the Current

With the downstream Phisix, the search is on for those stocks that is swimming against the current. Scanning the technical signals of the index stocks, two stocks catches my attention - SMC and URC.

Let me first feature the chart of SMC. This stock broke free from the downtrendline formed by connecting the highs of July 16 and Oct 2, 2007 but its rise was halted at 46.5. It corrected after that but the decline found support at 42.50.

In entering this stock, compute your risk at line 1 (the level on Monday, April 28, 2008 is 43.63). I would temporarily place reward at 46.5 (its high last Mar 31, 2008). Place stop right below line1. If SMC will break 46.5 adjust trailing stop to 46.5. Pls see the sidebar to see daily updates of Line 1 and trailing stop.

Bounce or Drop for Phisix?

Phisix did not follow DOW movement today. Let us see its movement to see the risk and reward of getting into position.

Looking at its short term trendline, P6 had broke out from the downward line formed connecting Jan 2 and Jan 15, 2008 high. Although it's above the downward line, it slides down with the line. A resistance line was formed by connecting Feb 5 and Mar 6, 2008 high. Let's call this line 2. On Apr 2, 2008, P6 broke out from line 2 and this line change it's role from resistance to support. Since the support that is catching P6 is downward bias, the index slides down with the support.

A new resistance line was formed by connecting Dec 7, 2007 and Apr 3, 2008 high. We call this line 1. Please note that line 1 is perfectly parallel to line 2. Line 1 (which is crossing today at 2949) crossed today the horizontal resistance (2957) thus giving double resistance to Phisix.

Closing at 2890 today, P6 is sitting exactly at the horizontal support (2890). It will be exciting to watch what will Phisix do tommorrow. Will it bounce or will it drop? If it bounce, you can estimate your reward up to line 1. If it drops, you're risk is at line 2. Pls check the sidebar to see where the lines will be crossing tommorrow. Will regularly update this until we formed another important line to monitor.

DOW Reversal?

More than the close, I am observing the high. If you are monitoring the level where the lines will crossed at the sidebar, the high for April18, 2008 (12,893.98) have touched the major downtrendline (for April 18, line 2 = 12,895). Another major observation, line 1 which is the short term uptrend line (for April 18, it is at 12,763.42) is crossing the horizontal resistance at 12,768.

Although the high did not break line 2, telltale signs shows that there's already an attempt for a reversal. When it failed to break out from that line, it heads back down but closed above line 1 (which is also the horizontal resistance level for the day).

What can we speculate on the direction of DOW for Monday? I'm seeing two probable scenarios: It will move inside Line 1 and Line 2 area or it will break Line 2. Watch out for the update of the lines on Monday.

You will still see updates of line 3 and line 4 (reference chart click here) but at the moment, these lines are irrelevant.

Betting on LOTO

This was a long delayed answer to Pat's request. Good news and bad news!

The good news first. 1) The price break free from the downward price channel. The resistance line of the price channel is now serving as our support. 2) The price also breaks the ceiling of the box that has been holding it in condolidation inside the price channel (ceiling is at P10.00). For the bad news, I know you'll see it very obvious. 1) The price went back inside the consolidation box. 2) The previous resistance of the price channel serving as support is in downward bias so the support is dropping.

Checking previous price movements (see blue circle), we can see that a box was formed middle of Aug 2007 and price broke out from the box on the last week of September only to be stopped at the resistance of the price channel. After that, it heads back down.

This time could be different since LOTO is outside the price channel. The most probable scenarios that could happen are 1) Price will head back down and bounce at the price channel line serving as support (this bounce on the line will confirm the strength of the support line. If the line will cross the floor of the box, it is the floor that will be tested first (floor is at P9.00). 2) It will head back up the ceiling and continue forming a new box with a probable resistance at P11.00

PAXful of caution

50MA crossed back down 32MA.

The 32MA had formed a flat line for about 3 weeks which could have meant that the price could already be consolidating. PAX attempted to break free from the consolidation last April 4, 2008 but failed. After that, the 32MA have exhibited a downward slope which should caution PAX trader that the price could revisit the recovery line (Line 1) which will be crossing April 14, 2008 at 3.30. If line 1 will fail to hold, price is bound to revisit 3.10 or 2.95.

I have added a monitoring on the sidebar of the recovery line (Line 1) so you will know at what level it will cross the day. It is upward bias so it is changing everyday.

TUNA Revisited

Last Thursday, TUNA break from the price channel support (LINE 1). If you are strict in adhering with your risk reward strategy, you have exit your position when the line was broken.

I have revisited TUNA to see where the next support is for that will give me the re-entry level. Although the price is still within the upward channel in the last week of Feb 2008, a consolidation box have started to form already. The box floor is at 1.84 and ceiling is at 2.02. Buying at 1.88 will give you a risk reward ratio of 0.285 (approximately 1:4) which is even below our recommended 0.33.

What if you have not cutloss when the channel support line was broken, is it still recommended to cutloss now? No because the price could be on its way up (taking the queue from the bounce at 1.84 and strong buying at 1.86) and selling at this point will just result to getting whipsawed. I suggest that you just hold and cutloss if the floor of the box is broken.

Take note that 50MA is already kissing the 200MA and is bound to cross over on April 14, 2008 or the next day. After that crossing, I have a feeling that the price will attempt to get back in the price channel and then try to take out the ceiling of the box.

Line 1 which is previously our support has now reversed its role to resistance. It is upward bias thus the level of resistance it gives changes every trading day. To give you guidance on where this line 1 is crossing, I have included a daily update of its level at the sidebar.

DJIA Update April 11, 2008

The short tem uptrend line (line 1 = 12,511.71) is broken with DJIA lowest at 12,302.06. Line 1 is now serving as resistance. Let's see on April 14, 2008 if DJIA will get back on line 1 which will be crossing at 12,553.67 or heads down further. Check the DJIA line update on the sidebar to monitor the levels. We are looking closely on the lowest of the day and not the closing. Line 3 can provide support.

Added Feature On The Sidebar

To let you have an update on where the lines will be crossing for the day, I have added an additional feature on the sidebar. This I call Lines Update. As critical lines need to be watch, I will be posting the exact price the lines will be crossing on a certain date. Charts may be updated too from time to time, so make sure you click on the chart to be able to follow the lines.

Initially, I will be updating DJIA, PAX and TUNA. Hope this feature will help you.

DJIA - Short Term Look

Phisix market sentiments are affected by DJIA so I decided to post here how I see the DJIA movement.

Last March 14, 2008, DJIA is a long black candle closing with -194.65 but there was a smile on my face. Seeing blessing amidst adversity, I made a call that we are on our way to recovery and the possibility that we have already seen the bottom for as long as the line formed by connecting the lows of Jan 22, 2008 and March 22, 2008 (from our chart at the left, that is line 4) is not broken (post at Finance Manila forum Foreign Markets and Dow Futures Watch March 14, 2008). The next trading day, DJIA bounced from that line confirming that it is a valid support. On my notes I call it recovery line because that will bring us to recovery for as long as it holds.

But as prices zoom up fast and far from that line, I become a little cautious because once the DJIA drop, the magnitude might be big considering its distance to line 4. I was delighted to see a higher low formed last March 31, 2008. A steeper line to catch the DJIA was formed by connecting the lows of March 17, 2008 and March 31, 2008 (Line 1).

Today, DJIA closed 12,527.26 (-49.18) but I'm more interested to know the lowest for this will show how strong the support provided by line 1 which is our current short term look. The lowest registered today is 12,468.97 and line 1 crossed today at 12, 427.81. Meaning, our line 1 is still holding. Yipee! DJIA is still uptrend on the short term. Let's see tonight's DJIA if it will bounced from the line or pierced it. Line 1 will be crossing tonight at 12,469.76. This is the level to watch tonight. The low has more stories to tell than the closing.

For Roiking - OPM Looks Fishy

Pat have requested this before but since I saw a bearish chart just like OV, I decided not to post the OPM chart anymore. But with a follow-up request from Roiking, I gave OPM a detailed look.

I have always been fascinated by the box theory of Nicholas Darvas. Tracing back from January 2005, we can see that OPM is in uptrend with boxes forming a pyramid. When all of a sudden, it was disturbed from it's steady rise and zoom up in the first quarter of 2007. It went up, it went down, but despite this volatility, you can still see that there is a box formed whose floor is at .020 and ceiling at .025. The price movement attempted 3X to get out of the box but failed (with each attempt forming lower high but respect the floor of the box).

We also see a symmetrical triangle whose break out can coincide with the box (either floor or ceiling). But I am bearish on this breakout since the 50MA had already crossed below the 200MA (do you see the blue circle that looks like the eye of the fish). Many called this Kiss of Death for it signals a further downturn of the price.

If you still want to buy this stock, you can compute your risk and reward as the floor and the ceiling of the box respectively. The best scenario could be it will just consolidate within the box way beyond the tip of the triangle. The worst: it breaks down from the floor of the box and hit the support line at around 0.016 (or maybe dropped to the next support line at .012)

TUNA update

With reference to our TUNA chart in the previous post "Something's Cooking With Tuna", support of price channel will be crossing tommorrow at 1.90 and resistance of the price channel will be at 2.30. At 1.98, risk is at .08, reward is at .32 and risk reward ratio is 0.27 (.08/.32). At 2pesos, risk reward ratio is still at 1:3 (risk reward ratio at 2pesos is 0.35).

Still a BUY at 2.

PAX update

Refer back to PAX chart in the previous post, the recovery line will be crossing tommorrow at 3.23. PAX at 3.35 is a good buy (that is if you can still buy PAX tommorrow at 3.35). Risk is at 3.35-3.25 (price based on fluctuation) = 0.1, reward is 3.70-3.35 = 0.35 therefore risk reward ratio is 0.28.