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Chart of the Week - Mar 31, 2008

First Gen Corporation (FGEN)

FGEN Weekly Chart - Rallying Strongly but Still Trending Down

charts are courtesy of Metastock

FGEN Daily Chart - Rallying Strongly but Approaching Resistances Above 

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

First Gen Corporation (FGEN) as well as its holding company, First Philippine Holdings Corporation (FPH), were definitely the highlight of the market this week as FGEN was able to rebound by more than 36% from its trough while FPH was able to rebound by more than 33% from its trough. There is no particular reason why prices have gone so much in such a short period of time, except that prices have already been battered quite excessively already in the last couple of months that prices are merely rebounding back up to their means. I've decided to do an analysis of FGEN  for this week.

For the last few months, the stock has been sold down aggressively because primarily of two reasons: the company is earning in Dollars so the strong Peso has been decreasing its bottom-line; and, the negative perception of the market with regards to its expensive acquisition of PNOC Energy Dev. Corp. However, at current prices, these bad news may already have been priced in into the market.

The weekly chart of FGEN above shows that the stock has formed a very long white candle this week. Obviously, this is bullish for the stock in the short-term and confirms that prices have already formed a trough at the 29.00 level. The fact that prices closed the week at its highs, indicates that the stock may continue to head higher this coming week. However, despite the strong movement of this stock this week, it is still trending down in the medium-term. In order to reverse the trend of the stock in the medium-term to up, prices must first take out 46.00 to the upside. If the stock continues to hold below the 46.00 level in this run, I would presume that the stock will simply consolidate between its previous low of 29.00 and that resistance at 46.00.

In the short-term, you can see that there are quite a number of resistance levels that the stock will first need to take out first before it is able to break thru that major resistance at 46.00. There are resistances at around the 43.00 level and even at the 39.50 to 40.00 level, which it has yet to take out. Although, of course, with the stock already climbing for the last five consecutive days in a row now, the stock may already be vulnerable to profit-taking as well.

Tsupiteros, who currently have positions in this stock, are recommended to just hold and use a break below 36.50 as your mental stop. A break below the 36.50 level may indicate that prices will be dropping back down towards its previous low at 29.00. If the stock goes straight up towards 46.00, I would suggest to take some money off the table already. I would no longer recommend Tsupiteros to buy this stock at this point, unless, of course, it drops back down near its previous low of 29.00. Position-traders, on the other hand, are still recommended to just avoid this stock for now since its medium-term trend is still down.

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.