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Chart of the Week - March 2, 2009

Export and Industry Bank, Inc. (EIBA)

EIBA Monthly Chart - Rallying from its Lows

charts are courtesy of Metastock

EIBA Weekly Chart - Testing its Medium-term Resistance,  

charts are courtesy of Metastock

EIBA Daily Chart - Trying to Hold Above its Support at 0.21

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

Export and Industry Bank, Inc. (EIBA) suddenly rose from the dead last week on news that RCBC is interested in acquiring a controlling stake in EIBA. The big question now is, at what price? You can see the very long white candles on the daily chart above after the news broke out. Prices climbed up from 0.14 to 0.28 in just three days. Since it hit 0.28 though, people have begun to take profits and have closed the week at 0.21. What can expect from EIBA from here?

If we look at the chart from a long-term perspective, you can see in the monthly chart above that the recent rally we saw was just nothing more than a rally within its overall downtrend. Does this mean that prices will continue to trend down from here? From this perspective, yes, that is what the charts are saying. Remember, from a Technical Analysis point of view, a trend is assumed to continue to be in effect unless a clear reversal is formed. However, since prices have been trending down for such a long time already, I'm just not so confident of betting on the short side of the trade anymore. In my opinion, it is now almost time to look to buy this stock but wait for the trend to turn from down to up. 

The weekly chart of the stock is showing almost the same thing - a stock that is trending down but is rallying from its lows. You can see in the weekly chart above that at its highs of 0.28, it was just two fluctuations away from its resistance at 0.30 and is relatively close to its resistance at 0.36.

The daily chart is the only time-frame where the RCBC merger news affected the stock since it has managed to change its trend from down to up. It was very, very strong in the first two days after the news broke out but has since dwindled back down to 0.21. Could this downswing just be a correction and would lead to prices climbing even past its previous high of 0.28? Or, would this downswing result in the prices heading back down towards its previous low at 0.14? Let's make some assumptions. First, with the way prices climbed from 0.14 to 0.28, I don't think prices will go anywhere near 0.14 anytime soon. On the other hand, the resistance at 0.28, looks formidable as well but, since prices are still a lot closer to 0.28 than it is to 0.14, I could say that there is a better probability for prices to break above 0.28 than for prices to break below 0.14. Of course, this would depend on how deep this correction of the stock would be. The deeper that this correction goes, the more unlikely that prices will be able to break above or just even head back up towards the 0.28 level.

How do we trade this stock? Since the monthly and weekly time-frames of the stock are still trending down, position-traders are recommended not to buy this stock for now. For the stock to convincingly trend up, prices must first break above its major resistance at 0.40. Therefore, this stock for the Tsupitero only. I would presume that all Tsupiteros who bought this stock on the RCBC news, have take profits from your positions already by now. One ought to be looking to re-enter this stock already by now for a possible move back up towards the 0.28 level. You have to two options on how to do this. You can either anticipate the low and pick a number between 0.175 and 0.21 to enter the stock. Or, you can wait for the momentum of the stock to shift back up before re-entering. On Monday, this will only happen if prices are able to break above the 0.225 level. If prices go lower on Monday, take note that this number will change depending on how low prices will drop. Just remember, the deeper this correction goes, the weaker the stock is. If prices manage to hold above 0.21, then, a formation of a higher high above 0.28 is a possibility.

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.