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Chart of the Week - Aug 3, 2009

 Cyber Bay Corporation (CYBR)

CYBR Monthly Chart - Testing its Previous High at 0.83

charts are courtesy of Metastock

CYBR Weekly Chart - Trending up Strongly but Trading at Extremely Overbought Conditions 

charts are courtesy of Metastock

CYBR Daily Chart - Meeting Lines Pattern in an Extremely Overbought Condition is Bearish

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

For the last couple of weeks, Cyber Bay Corporation (CYBR) has been very strong on rumors that Mr. Ramon Ang is interested in getting a majority in this stock. Last Friday, that rumor was confirmed with a disclosure stating that he is interested in buying out the minority shareholders of the company. If he really is serious about this acquisition, then, maybe this will continue to climb up in the future. However, for the short-term, it is possible that the stock has already found a peak as its behavior last Friday may indicate a possible "sell on the news". Let me describe its technical picture below.

You can see in the monthly and weekly charts above that the stock is now testing a very important previous high at the 0.83 level. This was the high that the stock formed last June 2007. This high is an important level from both these perspectives. From a monthly chart perspective, it represents the highs of its range. Thus, if the stock holds below this level, it may indicate that the stock is still merely trading sideways in its monthly chart. But if the stock breaks above this level, it will indicate that the stock may already be trending up in the long-term. From a weekly chart perspective, this high represents an important resistance line for the stock, especially because prices are now at an extremely overbought condition. If prices fail to break above this high, it may mean that the stock could possibly retrace back down significantly. From a weekly point of view, the stock may actually drop back down to 0.50 and it would still be trending up.

The short-term picture is what is a bit worrying, in my opinion. Last Thursday, the PSE disclosed that Mr. Ramon Ang is indeed interested in buying the minority shareholders of the company. From the way the stock behaved last Friday, it would seem to me that a lot sold on the news. With the stock currently trading at an extremely overbought condition, a correction from this point is very much a possibility. However, even if the stock drop back down from here, because the stock is trending up, I would tend to think that prices will eventually continue to climb back up. Strong support for the stock in the short-term is the 0.62 to 0.65 levels. Could there be any chance for the stock to continue to trend up from here because I do seem to be very bearish in this stock right now? Sure, but, first, it will have to take out that resistance at 0.87. A break below the 0.79 level on Monday would confirm that the stock is now indeed trending down in its very short-term trend.

So, how do we trading this stock. For Tsupiteros, last Friday looks like the perfect time to take profits in this stock. With the stock forming a bearishly looking meeting line pattern, I would tend to think that prices has now become toppish in the short-term. Thus, unless the stock corrects back down from here, I would not recommend Tsupiteros to buy this stock for now. As for Position-traders, you have two options: you may either just hold the stock and just place mental stops on the break below the 0.50 level; or, start taking profits right now and hope that you can buy your positions back at a much lower price. Remember, I will only continue to be bullish in this stock in the medium-term if prices are able to hold above the 0.50 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.