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Chart of the Week - November 10, 2008

  JG Summit Holdings, Inc. (JGS)

JGS Monthly Chart - Downtrend Accelerates

charts are courtesy of Metastock

JGS Weekly Chart - Trying to Hold Above 2.46, Volume Spikes   

charts are courtesy of Metastock

JGS Daily Chart - Bearishly Consolidating at its Lows

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

JG Summit Holdings, Inc. (JGS) has been one of the most battered stocks in the last 30 days. Just last Oct 3, 2008, the stock was still trading at the 7.00 level. Less than one month after, it traded to as low as 2.46. While the whole market did go down during that time, this one was quite exceptional. I don't know what's going in here and why its share price have dropped that low but they did report a larger than expected decline in their net income year to date. Could this be a good time to accumulate this stock, or, should people avoid it since it may still form new lows ahead? The last few trading sessions has been quite unusual. From an average daily volume of just less than 500,000 shares, the stock's average daily volume in the last six days alone has significantly increased to more than 7 million shares changing hands a day. Could there be accumulation going on, or, just wash sales to attract buyers?

You can see in the monthly chart of JGS how severe its downtrend has been. From a high of 14.50, which was registered sometime in February last year, the stock has dropped to a low of 2.46 this month, a whopping 83% decline in its share price in just 20 months time. The worst of this decline was felt last month when its share price decline from 7.00 at the start of October to 2.46 at the last day of the month. Could the stock still actually decline further from here? So far, there has yet to be any sort of indication that this downtrend is over already so I will simply presume that its price can still continue to go down further. If so, the next levels of support to watch out for are 1.56, which was its low in Aug 2004, 1.10, which was its low in Mar 2003, and, 0.72, which was its low in Sep 1998.

The weekly chart of the stock is saying almost exactly the same thing. It has formed four black candles in a row and its most recent candle has even formed a bearish inverted hammer pattern, thus, indicating that prices may still continue to go down. The fact that prices have respected its high in the previous candle at 3.25, indicates that the stock is still really weak. The only sign of hope for this stock is its volume, which has spiked up last week.

If one will look analyze the stock in more detail, as we go to its daily chart, you can see that for the last six days in a row, the stock has suddenly generated more than 10 times its average volume for a day. The volume declined a bit last Friday but is still obviously quite unusual. When I checked the buyers and sellers of the stock in the last six days, I saw that broker ATR-Kim Eng bought almost 22 million shares at an average price of 2.76 and has sold almost 26 million shares at an average price of 2.76 as well. The next biggest trader of the stock is Quality Securities, which bought and sold more than 7 million shares at an average price of 2.92 to 2.94. The biggest net sellers aside from ATR are foreign brokers, Asiasec, ABN-Amro, JP Morgan and UBS Warburg. The biggest net buyers are Tower, BPI, E Chua, Citisec and BH Chua. What is going on in here? Are there really legitimate buyers and sellers from ATR-Kim Eng and Quality Securities, or, are they simply buying and selling the same shares to attract buyers from the public? If I'm not mistaken, ATR-Kim Eng is a broker that has close ties with Mr. Gokongwei himself. Obviously, the foreign funds are taking advantage of the added liquidity to dispose of their positions.

From a technical point of view, its rally from 2.46 to 3.15 is a very shallow rally. Given that the stock was actually trading at 7.00 just 30 days ago, prices ought to have rallied a lot higher than 3.15, if it were really strong. The fact that the rally was shallow tells me that the stock may just be resting before it continues to drop further. Although the stock may hold within this 2.46 to 3.15 range for now, I would presume that prices are merely resting before it continues to trend down.

I sure hope no Tsupitero reading this article are currently long on this stock right now. If you are, I would suggest to not mind the volume of the stock and just try and sell your position as close to 3.15 as possible. I would certainly not recommend Tsupiteros to buy this stock for now, that is, as long as it trades below its previous high at 3.15. For Position-traders, I would not recommend buying this stock at all, even if it breaks above its previous high at 3.15. For those who are currently stuck at higher levels, your best-case scenario would be for the stock to climb near the 5.00 to 6.00 levels but that may be too much to ask for now. The only time that I would get tempted to buy this stock is if it reaches its all-time low at 0.72 cents.

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.