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Chart of the Week - July 20, 2009

 Lepanto Consolidated Mining Company (LC)

LC Monthly Chart - Trying to Break Above its Resistance

charts are courtesy of Metastock

LC Weekly Chart - Trending Up but Approaching Resistance at 0.30 

charts are courtesy of Metastock

LC Daily Chart - Trending up strongly on big volume but quite Overbought

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

Rumor has it that Mr. Manny Pangilinan is interested in acquiring LC from Mr. Felipe Yap. How true could this be? Obviously, from the way the stock has been behaving recently, a lot of people are biting it. Can the charts should tell us whether this is true or not? Based on Technical Analysis, I'll tell you what the charts are saying. It's up to you whether to believe the rumor or not.

In the monthly chart of the stock, you can see that prices have rebounded quite a lot already from its trough at 0.06. At current levels, prices are now testing its resistances at around the 0.23 to 0.25 levels. You can see in the chart above how these levels have become resistances for this stock - a diagonal support line, which used to act as a support for the stock, may now act as its resistance. The good news for the bulls though is, prices have already hesitated at the 0.23 level last month but was able to climb back up this month. If the stock were really weak, it ought to have corrected back down already by now. Still, I'm not sure if prices can easily break above these current resistance levels.

The most bullish looking time-frame for LC is its weekly time-frame. You can see in the chart above that prices have already formed a bullish higher low at the 0.155 level and appears to already be breaking above its previous high at 0.23. Notice the big volume of the stock last week when the market was able to form a higher low. This is a good sign and may indicate that its uptrend is well supported. If we follow the trend of the stock in this time-frame, it appears like the stock may already test its next resistance at around 0.30.

The daily chart is more like a mixed picture. It is bullish because the time-frame is trending up but is a bit bearish because prices are now quite overbought. Nevertheless, its behavior in the last two days is still quite bullish. Notice the black candle that it formed last Wednesday. If this stock were really weak, it ought to have corrected back down already by Thursday. Instead, the stock was even able to climb back up and even break above its high last Wednesday. Although the stock was not able to close the day at its highs last Thursday, it certainly tells us that its line of least resistance in the short-term is still definitely up.

So, how do we trade this stock, given that the monthly is bearish, the weekly is bullish and the short-term is neutral? Well, if you are a Tsupitero and you currently have positions in this stock, you may ought to just hold and use a break below the 0.22 level as your mental stop. Given that the stock is now relatively high, I would probably hesitate to buy it at current levels anymore. However, I may look at any dips as an opportunity to buy the stock. For Position-traders, I hope you were able to buy this stock last week. If you were not able to do so and you are interested in buying this one, you may want to try and buy it as close to 0.185 as possible. What about for long-term traders of this stock, what should they do? I would suggest avoiding it for now, that is, unless prices are able to drop back down towards its previous low at 0.06 to 0.10.

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.