^Disclaimer

^{Privacy Notice}

^{Terms of Service}

Chart of the Week - Jan 21, 2008

A. Brown Company, Inc. (BRN)

BRN Monthly Chart - Testing Historical Highs

charts are courtesy of Metastock

BRN Daily Chart - Formed a Trading Range between 2.50 and 3.30 

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

While the whole market was dropping like dead flies last week, one stock stood out from the rest by actually forming new highs instead.  A. Brown Company, Inc. (BRN) has been climbing up last week since the Monte Oro Group appears to have sealed its acquisition of Transco, despite some opposition from some lawmakers initially. I have no idea how much the Transco deal should add to the market value of BRN but I have been hearing some absurd valuations. Is it justified?

The monthly chart of BRN above shows that, while the stock is still certainly trending up, it is currently testing its all-time highs at around the the 3.40 to 3.70 levels. The last time the stock was trading at these levels was in the year 1996. Will it be able to break above these historical resistances? Possibly, but probably not without a fight from the bears. With the stock having climbed up quite significantly in the short-term already, I'm just not quite sure if it still has the momentum to continue to climb higher than 3.70. One thing that is going for the bulls though is the fact that volume in the right side of the monthly chart of BRN is quite exceptional and is significantly higher than its volume in the left side of the chart. This means that the threat of supply coming from those that got stuck with this stock some 10 years ago is probably insignificant. In fact, I would bet that most people who got stuck with their positions in BRN some 10 years ago have either already sold their positions at a loss, or, lost their certificates already. The real threat will be coming from those who bought at lower prices. The stock will continue to be trending up in the long-term as long as prices stay above 2.00.

In the short-term, you can see in the daily chart of BRN above that the stock has now formed a clear-cut trading range between 2.50 and 3.30. The fact that the stock already held above the 2.50 level on an extremely weak market already indicates that the stock is strong. With the stock closing at the 3.00 level last Friday, I would expect prices to probably anticipate the high at 3.30 and form a high just below it. I would be quite surprised if the stock continues to climb towards the 3.30 level. In my opinion, that would already indicate to me that the stock would eventually continue to climb higher. Thus, while the stock is trading sideways right now, there is a slight bias towards the bulls in the short-term. I will continue to be bullish on this stock as long as it holds above 2.50.

Tsupiteros, who currently have positions in this stock, have two choices. The more conservative approach is to simply take profits as close to 3.30 as possible. The more aggressive approach is to just hold and use a break below 2.50 as your mental stop. If I were trading this stock, I think my pick would be to just buy and hold. Just imagine, if the stock were trading so strong in a bad market, how much stronger would this stock be in a good market. Of course, there will always be that possibility that the stock may actually be counter-trend, thus, when the market goes up, this might go down instead. Tsupiteros, who would like to buy this stock, are recommended to buy as close to 2.50 as possible.

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.