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Chart of the Week - Jun 23, 2008

 Benpres Holdings Corp. (BPC)

BPC Monthly Chart - Broke below its Support at 2.30, Trending Down

charts are courtesy of Metastock

BPC Weekly Chart - Strong Downtrend, Approaching Support Levels 

charts are courtesy of Metastock

BPC Daily Chart - Oversold already but Continuing to Trend Down Strongly

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

Benpres Holdings Corporation (BPC) has been the most battered stock in the whole stock market this week and for last three weeks. The stock was not only affected by the bearish sentiments in the whole market but also from the political circus that it is in right now. The announcement of the government that it will lower down rates in the North Luzon Tollways simply aggravated the situation. Is there any light at the end of the tunnel for this one?

In the long-term, you can see in the monthly chart of BPC above that the stock has turned the corner and is now trending back down. There is a possibility that the stock could rally from current levels since it is already oversold, however, any rallies at this point, should be considered by those who have positioned in this stock as an opportunity to sell.

For the medium-term, it has been a disaster. The stock has dropped by an average of 0.40 cents for the last three weeks. Could this mean that prices will drop down to 0.70 cents this coming week? If it follows its trend, that certainly is how it is looking like right now. However, the difference between now and three weeks ago is that prices are now trading at historical support lines between 0.50 and 1.50 as can be seen in the chart above. The 0.50 level should serve as the very strong historical support of this stock in the medium-term. Before prices reach that level, there is also a strong support line between the 0.80 to 0.90 levels. I'll be damned if this downtrend goes straight down below the 0.50 level. I would presume that the bulls will start becoming aggressive somewhere around these levels. However, whatever happens though, the trend of the stock in the medium-term would still be down. Therefore, from a medium-term perspective, I would not recommend buying BPC at all at this point, even if it drops straight down to 0.50.

The opportunity in this stock lies in the short-term. With the stock dropping so fast and so deep at such a short period of time, a strong dead-cat bounce may occur in this stock once this downtrend is over. If, let's say, the stock forms a bottom at current levels, I wouldn't be surprised if prices rally back up towards the 1.50 level, which is almost a 50% return from current levels. The only problem is, how do you spot the bottom? Unfortunately, since the stock is trending strongly in the short-term, it is almost impossible to pinpoint the exact bottom in this stock. It may bottom-out here at the psychological 1.00 level, or, it may drop to as low as 0.50 cents before it would find a bottom. I would tend to think that some people are already using Martingale strategies and are buying at every 10% drop in the stock. Sure, you may do that, however, it is also possible that the stock will find a bottom but will simply trade within a range. If that happens, all those who are use Martingale strategies will fail. 

For the majority of Tsupiteros as well as Position-traders, I would suggest that you simply avoid this stock for the meantime. But for the more aggressive Tsupiteros, this stock represents an opportunity to take advantage of a possible strong dead-cat bounce in the next few weeks, if not days. Would it be a good idea to buy when prices are starting to climb already? Sure, you may do that but sometimes just when you think that it will start to rally already, you might just end up buying at the highs. How to get in will require a lot of skill, imagination and intuition in order to time its bottom.

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.