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Chart of the Week - October 27, 2008

  Atlas Consolidated Mining & Dev't Corp. (AT)

AT Monthly Chart - Broke Below its Support at 10.00

charts are courtesy of Metastock

AT Weekly Chart - Approaching Support Levels at 4.00, 3.00 and 2.50   

charts are courtesy of Metastock

AT Daily Chart - Trading at Extremely Oversold Conditions

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

Atlas Consolidated Mining & Dev't Corp. (AT) was probably one of the weakest stocks in the entire PSE last week. I guess this weakness is attributable to the weakness of metals in the world market. From a high of $4.00++/pound last July, Copper prices are now down to $1.72/pound. Nickel prices, on the other hand, dropped from a high of about $24.00/pound registered sometime in the middle of last year to its current price of $4.27/pound. With Copper and Nickel being the main metal groups that AT is mining, it has now come to a point wherein it may no longer be feasible for the company to even mine these metals as prices of these may probably have already gone down below their production costs. So is the selling of AT justified right now, even if prices are already 78% below its high last year of P21.25/share?

The weekly and monthly chart of AT above clearly shows a breakdown below its major support at 10.00. As soon as the stock broke below 10.00, all hell broke loose as prices are now just 4.55. Obviously, the break below the major support of the stock at 10.00, if not its previous low at 9.30, was a definite signal to sell the stock. With the stock now well below its support at 10.00, the stock is now trending down in all of its time-frames, including its long-term trend. Does this mean that the stock will now head straight down from here? Most certainly, it will not and it will tend to rebound somewhere when the market feels that it has gone down too much already, however, it is almost impossible to say where it will find a trough in the short-term. If we look again at the monthly and weekly charts of the stock above, you will see that there should be a pretty strong support in the stock somewhere around the 2.50 to 4.00 area. Of course, that still is a pretty wide range to pick. If you buy at 4.00 and stock eventually drops down to as low as 2.50, then, that's already a drawdown of 37.5%. I'll be damned though if the stock drops any lower than 2.50 for this downswing.

The daily chart of the stock shows just how volatile this stock has been, especially in the last two days. This time-frame also shows how extremely oversold the stock already is. While I am certainly not discounting the possibility that it continues to drop lower from here, especially since it still formed a long black candle last Friday, I would guess that the stock is now a lot closer to the bottom already at this point than it is to the top.

So how do we trade this stock? While it may be tempting to buy this stock right now because it may rebound significantly once it does, it is very, very difficult, if not impossible, to catch the bottom of this decline. Therefore, unless your risk appetite is high, then, I would suggest the majority of the Tsupiteros to avoid this stock totally. But for those who would like to gamble, you may try your luck. Since the stock is in a very strong downtrend, the "safest" place to buy would be in a new low, therefore, for those who would like to buy this stock, I would suggest to just buy it as low as you can. Your "floor price" should be the 2.50 level. In fact, I don't think it should even reach that level anymore. Placing stops in this kind of set-up is very, very difficult since tight stops will easily get hit. If you really want to guess the low in this one, your stops will need to be at least 20% so that you won't easily get whipsawed. If the stock is so risky to trade, why trade it at all? Well, because the stock is now extremely oversold and a rebound from current levels can easily give the lucky buyer a 30% or more return on their investment. For those who would like to sell their positions in this stock, you may want to try and sell it as close to 6.00 as possible, if you are conservative. For those who would like to be more aggressive, you may just try to hold and use stops down below once it starts to rebound. I would definitely sell though if the stock climbs back up to as high as 8.00 even if the stock become quite strong. Of course, I am assuming that the stock will rebound from current levels. If the stock rebound from lower level, then, you will have to revise down your targets.

Place your bets Tsupiteros!!!

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.