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Chart of the Week - Nov 7, 2009

 ISM Communications Corp. (ISM)

ISM Monthly Chart - Broke Above its Major Resistance Line

charts are courtesy of Metastock

ISM Weekly Chart - Continuing to Trend Up but is Trading Just Below its Medium-term Resistance Line

charts are courtesy of Metastock

ISM Daily Chart - Broke Above its Consolidation on Heavy Volume

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

ISM Communications Corp. (ISM) has been trading up and down between 0.060 and 0.0675 for the last two weeks. Last Friday, something completely different happened - it broke above its consolidation and now looks poised to trend up once again. I don't know what's up with this one but I've been hearing rumors on Eastern Telecoms. A sale perhaps or something? Or, maybe RVO wants to become a major player in the telecom industry as well. Whatever it is, something is definitely cooking as evidenced by the huge volume last Friday.

ISM is one of only a handful of stocks in the PSE that is currently trading at a new 52-week high. In fact, if you will look at the monthly chart of the stock above, prices appear to have already broken above its major resistance levels and could now trade in a higher range. This breakout alone in the monthly chart tells us that something is up with the company. Take note, the stock has never broken above its major resistance line since the year 1998. For the first time in 11 years, the stock has once again traded at 0.070. In 1997, the stock traded up to as high as 0.21. Can it climb back up to that level? That may be too much to ask but, most likely, prices will continue to trade higher from here.

In the weekly chart of the stock, I was already thinking that prices may have held below its resistance at 0.0675. If you will look at the weekly chart of the stock above, prices are currently trading at the higher end of its range. The fact that prices continued to climb passed its previous high at 0.0675 is a good sign for the bulls. Can it actually break above its resistance at 0.0775 and accelerate higher? It's possible but I would tend to expect a slow sideways to upward trend instead.

In its daily chart, you can see that prices have now convincingly broken above its resistance at 0.0675 on heavy volume. The heavy volume indicates that all those who would like to sell at 0.0675 may have been absorbed by the market. If prices can continue to climb higher from here, the 0.0675 level may already be a support for the stock as all those who sold at that level may decide to buyback. Immediate resistance of the stock is the psychological 0.080 level but I wouldn't be surprised if prices eventually climb all the way up to 0.090.

How do we trade this stock? Well, I sure hope all those who wanted to buy this stock has already done so by now. For Tsupiteros, who have been range-trading this stock, I can't blame you if you sold at 0.0675 only to buy it back higher at 0.070. I would suggest those Tsupiteros, who are currently long, to just use a break below the 0.065 level. In fact, if the stock is really, really strong, it should no longer trade back down to 0.0675. Those who would like to buy this stock, you may want to buy it as close to 0.065 as possible. As for Position-traders, unless you already entered this stock a few weeks ago, I think it's a bit too late to get in right now. As you can see in the weekly, if you buy this stock, you will be buying it at the high end of its range already. Of course, that doesn't mean that the stock will drop. I only meant that, for a position-trader, there may be other better looking stocks out there that this stock. If you still really want to buy it, I would suggest that you follow the buy and sell signals of the Tsupiteros. Whatever happens, prices should no longer drop below the 0.060 level. If prices break below 0.060, all bets on the long side are off.

Good luck Tsupiteros!

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.