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Chart of the Week - June 22, 2009

 First Philippine Holdings Corporation (FPH)

FPH Monthly Chart - Rallying but Encountering Resistance at 34.50

charts are courtesy of Metastock

FPH Weekly Chart - Continuing to Trend Up, Testing Support at 27.00 

charts are courtesy of Metastock

FPH Daily Chart - Broke Below its Support at 30.00, Trending Down?h

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

There isn't really any news in First Philippine Holdings Corporation (FPH) except that it's been following the footsteps of its subsidiary, Meralco. However, for the last couple of days, something bearish happened - it no longer followed Meralco. While Meralco was able to rebound off its support at 127.00, FPH failed to rebound and even broke below its support at 30.00. I guess instead of following Meralco, it followed it's other subsidiary, First Gen. I wouldn't want to guess what it will follow next. Suffice to say that, while the stock is still trending up in the medium-term, the short-term aspect of the stock appears to have weakened. Let's go to it in detail.

First, let's look at the big picture - its monthly chart. You can see in the chart above that the stock is currently trading within a very, very wide range of between 7.20 and 92.00. Just by looking at this chart, it would be ideal to buy as close to 7.20 as possible and sell as close to 92.00 as possible. Last October, the stock dropped to as low as 12.25. It has since rallied to 34.50 just last Tuesday. Obviously, people already anticipated the low at 7.20 and has bid up the price ahead of that low. Thus, the rally towards 34.50 means that people may have already concluded that the trough at 12.25 will already be low that will not be broken until years to come. Besides, the last time FPH was at 7.20 was in the year 2003. The question now is, are the bulls correct in assessing it this way? The fact that the stock formed a higher low at the 12.25 level relative to its previous low at 7.20, is a good sign for the bulls. However, if the stock does form a peak here at the 34.50 level and starts to drop back down once again, I'm just not so sure if that 12.25 low will hold its ground. For the meantime, unless the uptrend in the weekly chart holds, let's just dumbly think that this will be going back to 92.00 already.

The weekly chart of the stock is showing a very strong rally from its trough at 12.25. However, in the last week, signs have been showing that the rally may have reached a peak already. First of all, when the stock broke above its previous high at 30.50, it ought to have started to trend up already. While it did rally up to as high as 34.50, prices have once again dropped back down below its previous low at 30.50. This is not a good sign for the bulls and may indicate that the uptrend is stalling. The levels to watch out now are the 25.00 to 27.00 levels. If this uptrend will continue to form higher highs and continue trekking up towards its all-time high at 92.00, it will need to hold above this support area of 25.00 to 27.00. If, for any reason, the stock fails to hold above that 25.00 to 27.00 support area, there will now be a risk for the stock to eventually drop back down towards its previous low at 12.25.

The daily chart is not a very bullish picture at all. For the last few days, prices have been steadily going up and has been following a clear-cut upward channel from 27.50 to 34.50. Last week, something very bearish happened - it broke below its upward channel and has dropped back down towards 27.00. While the stock could start rallying from current levels, there is now a pretty strong resistance area at around the 30.00 level. Thus, as long as prices trade below 30.00, there is a risk that prices may drop back down to as low as 25.00, if not even lower. The only way to invalidate this, would be for the stock to convincingly breakout above that 30.00 level.

How to we trade FPH? For Tsupiteros, I would suggest to try and sell as close to 30.00 as possible. I would not yet recommend buying FPH at this point, although, the more aggressive types may want to try and bottom-pick this stock as close to 25.00 as possible. As for medium-term traders, I would recommend to just hold and use a break below the 25.00 level as your mental stop. I would only recommend medium-term traders to buy into this stock if prices have proven that it will be able to hold above that 25.00 level. Just be aware, if prices fail to hold above that 25.00 level, all bets on the long side will now be off.

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.