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Chart of the Week - December 29, 2008

Empire East Land Holdings, Inc. (ELI)

ELI Monthly Chart - Rallying but still Trending Down

charts are courtesy of Metastock

ELI Weekly Chart - Strong Rally from its Lows but...u   

charts are courtesy of Metastock

ELI Daily Chart - Parabolic Spike!u

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

While everyone was so focused on MEG and AGI for the year-end dressing rally, who would have thought that it was going to be ELI instead that will emerge as the top gainer for the last trading day of the year? From a low of 0.20 just last Dec 9, 2008, the stock was able to rally up to as high as 0.37 last Dec 24, 2008. An 85% return in just half a month's time. Can this rally be sustained, or, should you have taken profits already last Dec 24?

First, let's look at the big picture. You can see in the monthly chart above that the stock has formed a trading range between 0.09 and 1.24. Actually, the stock has a tendency to bounce everytime it gets closer and closer towards the 0.17 level. The year 2002 was an exception as the stock dropped to as low as 0.09. On the other hand, everytime the stock climbs above 1.00, the stock has a tendency to peak. Given this historical behavior of the stock, could it be that prices have already formed a trough last October when it dropped to as low as 0.19? Maybe but from a monthly point of view, it is still quite premature to say as prices still looks like it is trending down from its peak at 1.04.

From a weekly point of view, you can see what I mean when I said that prices appears to still be trending down from its peak at 1.04. While prices seems to be trying to breakout of that downtrend right now, I just can't help but think that most of the gains of the stock in the last few days were mostly just because of window-dressing and I really doubt if we'll still see some real buyers in this stock at 0.33 come Jan 5. The daily chart of the stock shows that they have been window-dressing this stock since a few days ago. The biggest price gains though were in the last two days. Notice that, despite their best efforts to close the stock at its highs last Dec 24, the stock still closed the year at 0.33 and not at its intra-day high at 0.37.

So how do we trade this stock? Obviously, while the insiders of this stock were trying to close the stock high last Dec 24, there were some who were trying to take advantage and were trying to sell. In my opinion, those who sold last Dec 24 had the right thing in mind. I certainly will not recommend buying into this stock at current levels. Although the stock could potentially be a "buy" on a monthly chart perspective, it is just too early to say and I wouldn't bet on it yet unless I get more evidences that tells me that the stock is now indeed on the way up already. So, from a short-term perspective, I am recommending a "take profits" on the stock but, from a medium-term perspective, I am recommending to just watch the stock for now and see if prices are indeed bottoming-out already. Remember, while it may tempting to think that prices may have already bottomed-out at 0.19 already and is now on the way back towards the 1.00 level, if this rally just turns out to be nothing more than a dead-cat bounce, prices may still potentially drop back down towards its all-time low at 0.09.

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.