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Chart of the Week - July 6, 2009

 IPVG Corporation (IP)

IP Weekly Chart - Testing Support of its Medium-term Uptrend 

charts are courtesy of Metastock

IP Daily Chart - Consolidation

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

PAX as well as its sidekick, IPVG Corporation (IP), has been very, very active recently despite the lackluster performance of the entire market. Why? I don't know. There are no news on these issues but players seem to have perceived these stocks as volatile, thus, all the short-term traders are playing these issues right now. Could all these buying have any merit in it? Or, are the insiders merely giving the public a ride?

Let's look at the big picture first by looking at its weekly chart above. You can see that the stock has already broken above its downward channel when it broke above the 1.50 level last April. Obviously, the stock is now trending up in this time-frame, just like the rest of the market. However, after peaking at the 2.80 level last May 26, the stock has begun to consolidate in the short-term. The big question now is, is the stock merely consolidating before it continues to trend higher, or, is the stock actually topping out at this point? There are valid arguments for being bullish or bearish in this stock in the medium-term. The bulls are obviously looking at the medium-term trend of the stock. The bears, on the other hand, may reason out that the stock has already rebounded from an oversold condition but it's long-term trend is still down. A break above or below its short-term consolidation will determine who is making the right call.

If the medium-term trend of the stock is a bit confusing, the short-term is schizophrenic. You might be perplexed by the numerous trendlines in the daily chart of the stock above. To simply, just concentrate your eyes on the blue solid parallel trendlines. The support line of this trend is at the 2.00 to 2.06 levels while the resistances are at the 2.46 to 2.50 levels. As long as it continues to trade within this range, the medium-term direction of the stock will be "50-50". A break above or below this consolidation is required to give the next medium-term direction of the stock. If prices convincingly breakout above that 2.50 level, I would expect prices to climb up to as high as 3.50. But if prices break below its support at 2.00, the stock may drop back down towards the 1.50 level, if not lower.

Medium-term traders, who currently have positions in this stock, are suggested to just hold and use a break below the 1.86 level as your mental stop. Those who would like to buy this stock may want to buy as close to 2.06 as possible. Tsupiteros, on the other hand, may want to just range-trade its consolidation of between 2.06 to 2.40 by buying as close to 2.06 as possible and selling as close to 2.40 as possible.

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.