^Disclaimer

^{Privacy Notice}

^{Terms of Service}

Chart of the Week - May 25, 2009

 Loadstar Invt. Hldg. Corp. (LIHC)

LIHC Weekly Chart - Strong Uptrend Continues but Approaching Heavy Resistances Between 8.00 and 12.50 

charts are courtesy of Metastock

LIHC Daily Chart - 11th Consecutive Up Day in a Row

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

By far, the top gainer of the entire market throughout this last two months has been this stock right here, Loadstar Invt. Hldg. Corp. (LIHC). From its trough at 1.70 last Mar 19, 2009, the stock has managed to climb up to 8.30 or a 388% climb in just two months time. Wow! Obviously, the laws of Physics don't apply here. Last Thursday, news came out that the company with a joint investment with MUSX has purchased shares in Abacus Coal Exploration Development Corporation. Admittedly, I was expecting a "sell on news" behavior in the stock, yet, prices still climbed up from 7.90 to 8.30. I'm not really sure if Technical Analysis or any kind of analysis will apply to this stock but I will now try to attempt to analyze it here.

First of all, let's look at the big picture by examining the stock's weekly chart. You can see in the stock's weekly chart above the very strong uptrend that it has formed eversince its trough at 1.70. In a normal chart, prices would usually at least hesitate first at the medium-term resistance line which, in this case, was in the 5.00 level (blue dotted upper trendline). However, with LIHC, the stock not only did not mind that resistance at 5.00, it even went straight up towards the 8.30 level. The all-time high of this stock is at the 28.00 level and some people are actually thinking already that it may climb back up to that level. However, in order to judge objectively where this stock may encounter resistance next, one would have to analyze the volumes in the chart. You will see that the biggest volumes in the chart occurred last June to July 2008 when the stock was trading at the 8.00 to 12.50 levels. This area in the chart is where the huge resistances lie. Why? Because a lot of people got stuck with this stock during that time and may decide to sell if prices climb back up to their costs. So, in the weekly chart, while the stock is now trending up, it is now approaching heavy resistance just above.

The daily chart is an extraordinary picture as prices have climbed non-stop for an 11th day in a row with prices even climbing by an average of about 6% a day. While it is so easy to say that prices are now overbought and may be due for a correction soon, it's not quite as simple as that. I have been bearish in this stock eversince it hit 5.00 and it still was able to climb to 8.30. Why can it not go to 12.50 from here? When a trend is this strong, it is very, very difficult, if not almost impossible to say where it's peak is going to be. It may peak right now, or, it may peak after one week. All I know is, eversince the stock broke above its resistance at 2.60, prices have always formed a long white candle and has never broken below the low of the previous day. It is when the stock no longer exhibits this behavior and closes the day below its previous day's low that one should already get worried. For Monday, I would presume that support will now be pegged at around 8.00 to 8.20 with resistance now at the 9.00 level. These numbers will change as the stock continues to climb.

So, how do we trade this stock? For Position-traders and more conservative Tsupiteros, there isn't much you can do with this stock anymore, unless you are already holding it. It's just too late to buy it at current levels. At this point, the more that it goes up, the more scarier it becomes. But if you are holding it, you may want to use a break below the 7.60 level as your mental stop. Just continue to raise that stop as long as the stock continues to climb. For the more aggressive Tsupitero, you may want to buy it as close to 8.00 as possible and try selling it as close to 9.00 as possible. You may also want to buy it near 8.00 and just hold but, in my opinion, that would be quite risky already since I don't think it's a good idea anymore to buy and hold a stock, which has already climbed up by 388% in just two months time.

Aside from Chucky and Jap, were there anyone who was actually able to buy this near 2.00 and did not have inside information and are still holding it up to now? If there were, I salute you!

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.