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Chart of the Week - July 30, 2007

A. Brown Company, Inc. (BRN)

BRN Monthly Chart - Held Below its Resistance at 2.16

charts are courtesy of Metastock

BRN Daily Chart - Trending 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

A Brown Company, Inc. (BRN) was certainly the highlight of the week last week as the stock climbed up from 1.68 to 2.34 in just five days in anticipation of the bidding of the Masinloc Power Plant, which BRN participated and was rumored to have already bagged the deal even prior to the release of the winner last Thursday. On Thursday, which was the date of the bidding, the stock plunged from its close last Wednesday at 2.30 to 1.96. With that kind of behavior, you can already be certain that BRN lost the bidding. On Friday, when everybody knew that BRN lost the bidding and the market was terribly weak due to a fallout in Wall Street, the stock immediately gapped down to 1.76 the next day and still closed the day at its low at 1.50. What can we expect from BRN next week?

With the stock closing at its lows and with a long black candle, I would tend to expect prices to continue moving lower come Monday. Notice that, despite prices already being very, very low relative to its peak at 2.34, the stock still failed to get any kind of upward momentum and still closed the day at its lows. This behavior is definitely not a good sign for the bulls since it indicates that the downward momentum is very, very strong. On Monday, I wouldn't be surprised if prices gap down once again and form another long range to the downside. Although there are support levels at 1.46, 1.40 and 1.14, as you can see from the chart above, I certainly would not want to get in front of this freak train and try to pick the bottom yet at this point.

On the monthly chart above, you can see that the stock has formed a clear-cut consolidation with its support at 1.14 and its resistance at 2.16. With the stock trying to breakout above that 2.16 resistance line last week but failed, you can expect prices to drop back down near its previous low at 1.14. From a monthly perspective though, as long as prices hold above that 1.14 line, the stock is still considered to be trending up in the long-term and will tend to expect prices to continue moving higher in the next few months ahead.

With BRN failing to win the bidding for the Masinloc Power Plant, there isn't much left to be excited about with BRN in the short-term. Although it will certainly find a bottom soon, expect prices to simply consolidate at its lows soon thereafter until it finds another bidding to back out from or lose (hehehe). I sure hope Tsupiteros, who were playing with this stock in the last few days, were able to get out of your positions just before the stock plunged to its death last Thursday. If you are a Tsupitero, I would suggest that you simply look for another stock to trade for the meantime. For medium to long term players, you may want to buy as close to 1.14 as possible with stops placed on the break below the same level.

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.