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Chart of the Week - Jun 9, 2008

 Loadstar Investments Holdings Corp. (LIHC)

LIHC Weekly Chart - Downtrend Ends but Is It Trending Up?m 

charts are courtesy of Metastock

LIHC Daily Chart - Established Peak at 10.25 but Formed Trough at 7.90

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

Loadstar Investments Holdings Corporation (LIHC) certainly caught the market's attention last week as prices rocketed from 6.40 just last Jun 2 to 10.25 last Jun 4. It dropped all the way back down to 7.90 last Jun 5 and, by Friday's close, it was trading back up to 9.20. There are rumors going on that the stock is a target of a backdoor listing of some company. Don't ask me details though since that's the only thing I know.

In its weekly chart, you can see that the stock has finally broken above its downward channel, thus, signaling the end of its downtrend. The long white candle on relatively big volume confirms the breakout from the downward channel last week. The big question now is, is the stock already trending up or not? While the stock has indeed broken above its downward channel already, it is just too early to conclude if the stock is already trend up or not. It is also possible that the stock will now trade within a range of, say, 5.30 and 10.25. The break above its previous high at 8.90 though is tempting us to believe that this already is a stock that is trending up. A convincing break above the 10.25 level would give us a minimum target of 15.00.

In its daily chart, the stock caught everybody's attention when prices suddenly climbed from 6.40 to 9.60 last Jun 3. It looked as if the stock was already going to catapult to the heavens already until it encountered resistance at the 10.25 level. I guess people thought that that was the end of it so people started to panic and pushed the stock to as low as 7.90. Last Friday, the stock again gapped up to 8.30 and managed to close the day at 9.20, thus, forming a bullish higher low. Obviously, there is a significant resistance at the 10.00 to 10.25 levels. If you bought at around those levels and you saw the stock drop to as low as 7.90, wouldn't you want to sell when prices climb back up to your breakeven price? On the other hand, those who sold near the 7.90 level are very frustrated right now. How would you feel if you sold a stock then see it climb by 15% right after you sold it? Certainly, the next time it drops back down to where you sold it, you might be tempted to buy it back. Therefore, for the very short-term, prices will probably be stuck at this 7.90 to 10.25 range. However, with the stock forming a higher low at 7.90 and volume in the last four days being quite unusual, I would tend to think that the stock has better chances of breaking above 10.25 than breaking below 7.90. From the way I see it, I would tend to think that there already is something cooking in here.

Tsupiteros, who currently have positions in this stock, are recommended to just hold and use a break below 8.30 as your mental stop. For those who would like to buy this stock, you may want to buy as close to 8.30 as possible. I will continue to be bullish in this stock in the short-term as long as prices stay above 8.30. If prices break below 8.30 and especially if it breaks below 7.90, I'm afraid there is a risk that prices may head back down towards its previous low at 5.20. For those who already have positions and would prefer using counter-trend trading strategies, you may want to take profits already as close to 10.25 as possible. But for the more adventurous ones, you may prefer to just hold and hope that it goes back up to 20.00. :-)

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.