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Chart of the Week - September 22, 2008

 Banco de Oro Unibank, Inc. (BDO)

BDO Monthly Chart - Trending Down but Trying to Hold Above 30.00

charts are courtesy of Metastock

BDO Weekly Chart - Trending Down but Big Volume may Indicate Accumulation   

charts are courtesy of Metastock

BDO Daily Chart - Strong Rebound from its Trough at 31.50

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

Banco de Oro Unibank, Inc. (BDO) led the market panic in the beginning of last week on news that the bank had a P3B exposure to Lehman Brothers. However, by Thursday, when the rumor was already all over the news, something incredible happened - the stuck bucked the market's trend and has begun to climb. Last Thursday, BDO was the only big cap that was actually up for the day. Rumors began circulating that Mr. Henry Sy himself was the one buying the stock.

The monthly and weekly chart of the stock shows that the stock is now trending down but appears to have found a trough at the 31.50 level. The monthly chart above shows that the 30.00 level is not only psychological but was an important low last 2006. The fact that prices rebounded above the 31.50 level, which is very, very close to the 30.00 level, may indicate that the market has anticipated that important support at 30.00. Furthermore, if you will look at the stock's weekly chart above, the stock has rebounded off that 31.50 level on unusual volume. This to me indicates that there is accumulation going on right now in the stock. However, to start trending up in the medium-term, prices must first take out that previous high at 44.00. A break above the 44.00 level would confirm that the downtrend of the stock in the medium-term has ended already. I would be quite worried for the bulls if the stock already encounters resistance at the 40.00 level and prices start to head back down. If that happens, it would tell me that the stock's medium-term downtrend is still very much intact and prices could still possibly retest its previous low at 31.50.

In the short-term, you can see the very clear-cut V-reversal of the stock at the 31.50 level. The fact that prices formed a V-reversal on heavy volume, tells me that this low will not easily be revisited. With the stock now forming a long white candle last Friday and closing the day at its highs, I would expect prices to test that short-term resistance line at the 40.00 level in the next couple of days, if not on Monday. The heavy resistances of the stock will come at the 40.00 to 44.00 levels, which is where its previous consolidation was located. Some of those who bought at those levels and are currently stuck will probably sell their positions once they breakeven. Furthermore, some of those who bought at lower levels may probably take profits once prices reach those levels. Unless Mr. Henry Sy decides to gobble up all those supply, I expect prices to at least slow down its ascent once it reaches those levels.

Tsupiteros, who currently have positions in this stock, are recommended to just hold and use a break below 35.00 as your mental stop. If the stock climbs up again on Monday, I would suggest to increase your stop to a break below last Friday's close of 37.50. For those who are looking to buy this stock, you may want to buy it as close to 35.00 as possible. Given what this stock has done in the last two days, I really doubt whether prices can still drop back down to 31.50 in the short-term. If, on the other hand, the stock continues to climb up on Monday, I would no longer suggest to chase it anymore. As for Position-traders, it would be very difficult to recommend this stock to them right now. Strictly speaking, since the stock is still trending down in the medium-term or in the long-term, Position-traders should not be buying this stock yet for now. However, if you insist, I would suggest to just follow where the Tsupiteros would be buying but place a wide stop instead like a break below the 31.50 level. If the stock has indeed found a bottom already, it should no longer drop below 31.50 anymore. In fact, it should no longer go anywhere near it anymore. If Mr. Henry Sy is indeed buying, I don't think he will allow his stock to go below his cost is anymore.

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.