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Chart of the Week - November 3, 2008

  DMCI Holdings, Inc. (DMC)

DMC Monthly Chart - Trying to Hold Above its Previous Low at 2.18

charts are courtesy of Metastock

DMC Weekly Chart - Rebounding from its Low at 1.86   

charts are courtesy of Metastock

DMC Daily Chart - Strong Rally but Approaching Resistance at 3.00

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

DMCI Holdings, Inc. (DMC) was the strongest stock in the entire market in these last couple of days that the market has been rebounding. If I'm not mistaken, not only is this stock extremely oversold already when it was trading below 2.00, but it was already extremely undervalued from a fundamental analysis point of view. For the last two months, the stock has been hounded by heavy foreign selling specifically from foreign brokers JP Morgan and CLSA. However, PCIB Securities has been accumulating this stock heavily despite these heavy foreign selling. Who could be doing the right thing, the foreign funds or PCIB?

The monthly chart of DMC above isn't exactly the prettiest chart that you will see. Obviously, the stock is no longer trending up in this time-frame and may even already be trending down. However, it is currently trading right around its previous low at 2.18. Although there have yet to be any signs of a short-term reversal yet in this stock in this time-frame, the fact that prices dropped below its previous low at 2.18 but has managed to close the month above it, may indicate that prices will already start to rebound from here. Remember, the stock has not had a white candle in its monthly chart since May. Could this month be the month that it finally forms a white candle? Resistance for this time-frame is pegged at the 6.00 level. Can it actually reach that level? I don't know but as far as I can see, a rally towards the 6.00 level will probably be the best that this stock can do. Forget about the stock climbing back up to its highs at 12.00. It's not going to happen anytime soon.

In the weekly chart of the stock, you can see that the stock has finally formed a white candle after 9 weeks of continues decline. The fact that the white candle was a long candle and has totally engulfed the range of the previous candle, may indicate that the stock is indeed rebounding right now. For this time-frame, the best that this stock can do is to rebound back towards its resistance at around the 4.00 level. You can see in the chart above that the 4.00 level is situated right at an important resistance area as highlighted by the two blue-colored parallel trendlines. If this stock will continue to climb from here, the uptrend will most likely encounter heavy resistance at around that level.

While I am quite bullish on this stock in its weekly point of view, I am not so bullish with it in the short-term. Why? Because the stock has already climbed up so much in the last two days already and may already be overbought. Remember, from its trough at 1.86, the stock has already climbed by 43% in just two days time. The red horizontal trendline above indicates a heavy resistance line at the psychological 3.00 level.

So how do we trade this stock? If you are someone who would like to hold positions for a few months to a few years time, I would suggest to look for another stock to trade. However, if you are someone who would like to hold positions for a few weeks time, then, this stock may be for you. For those who would like to hold positions for just a few days time, it may too late to buy it right now but I would probably buy it if the stock corrects from current levels. Do you get my point? Obviously, you would like to buy this stock as close to 1.86 as possible. However, given the strength that this stock has shown in the last two days, I would be very, very surprised if the stock drops back down to that level. I'm not so sure if the stock will already correct from current levels but if you are a Tsupitero, your only option now would be to either hold or take profits. I would certainly not recommend buying this stock anymore at current prices unless the stock is able to form a higher low. If you are still holding, I would suggest that you just hold and use a break below 2.40 as your mental stop. But for Position-traders, who may be targeting to take profits sometime in the end of the year, you may opt to buy now and just place mental stops on the break below 1.86.

Good luck Tsupiteros!

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.