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Chart of the Week - September 8, 2008

 Ajo.net Holdings, Inc. (AJO)

AJO Monthly Chart - Rebounding from its Lows

charts are courtesy of Metastock

AJO Weekly Chart - Broke Above its Medium-term Resistance   

charts are courtesy of Metastock

AJO Daily Chart - Bullishly Consolidating Above 0.0775

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

Ajo.net Holdings, Inc. (AJO) has been very strong recently on the back of rumors that Platinum Mines will be backdoor listed into AJO. The bears' argument is that the price of metals in the world markets is already trending down. The bulls' argument is that, if the deal pushes thru, then, this would be case of, from nothing to something. Let's see how the technical picture looks like.

The monthly chart doesn't show much except that the stock appears to have bounced off its low at 0.04 already. It's recent high is at the 0.185 level but I really doubt whether prices can climb back up to that level anytime soon unless volume really picks up. Furthermore, with the way prices dropped from  0.185 to 0.040, I would tend to expect prices to just form a lower high below the 0.185 level and consolidate between that lower high and its trough at 0.04.

In its weekly chart, you can see that prices appears to have convincingly broken out above its resistance at around 0.065. The fact that prices closed the week at its highs and with a long white candle, tells me that prices will most likely continue to climb higher this coming week. However, you can see in the chart above that the stock is now getting closer and closer towards its psychological resistance at the 0.10 level. Notice that the 0.10 to 0.105 levels are not only a psychological resistance area but was the previous support of the stock prior to its downtrend to 0.04. Therefore, while the stock may be trending up in the medium-term already, I expect a formidable resistance at the 0.10 level.

In the short-term, you can see that prices are now consolidating at the highs of its range. This behavior is a good sign for the bulls. The fact that prices failed to drop despite the big sell-off last Friday, indicates that prices are relatively strong. There is currently resistance at the 0.085 level but, as long as prices continue to hold above the 0.0775 level, I will continue to expect higher prices from here.

Tsupiteros, who currently have positions in this stock, are recommended to just hold and use a break below 0.0775 as your mental stop. For those who are looking to buy this stock, you may want to buy it as close to 0.0775 as possible. Position-traders, on the other hand, may want to buy the dips and buy as close to 0.0675 as possible. I wouldn't suggest to Position-traders to chase it though if prices immediately climbs up above its minor resistance at 0.085. With prices already so close to its psychological resistance at 0.010, I would suggest to wait for a correction before buying.

Notes:

Short-term Traders/Tsupiteros vs. Medium-term/Position Traders: Recommendation for short-term traders or Tsupiteros are meant to be used by traders whose holding period are limited to one day to two weeks. Medium-term or position traders are meant to be used by traders whose holding period are two weeks to three months. Long-term investors whose holding period is more than three months should not follow these recommendations.