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Chart of the Week - July 28, 2008

 Megaworld Corporation (MEG)

MEG Monthly Chart - Rebounding from its Major Support Line?m

charts are courtesy of Metastock

MEG Weekly Chart - Rebounding from its Trough at 1.00, Approaching Resistance at 1.60 

charts are courtesy of Metastock

MEG Daily Chart - Broke above its Resistance at 1.30, Trying to Hold  on to its Gains Above its Support at 1.38

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

Megaworld Corporation (MEG) has been one of the leaders of this rally that the market has experiencing last week as prices were able to breakout above its consolidation at 1.30 and on extremely heavy volume. The fact that prices have already dropped by more than 75% from its highs last year, is now attracting a lot of bargain hunters.

In its monthly chart, you can see how severe the stock's downtrend was in the last few months. From a high of 4.60 last Oct 19, 2007, the stock dropped to as low as 1.06 just last July 3, 2008. If we follow the long-term upward path of MEG above, there is a possibility that the stock may have already hit rock-bottom in the long-term and is now poised to climb back up. Of course, with the stock merely forming a single white candle from its lows, it is just too early to speculate on a long-term bottom right now. The stock will need to show us a lot more strength than just a single white candle to tell us that it indeed has found a trough. After 1.00, the next strong historical support of MEG is at the 0.80 level.

In its weekly chart, you can see that the stock was able to bounce right at its medium-term support at around 1.00. It is currently rallying right now but is now approaching its medium-term resistance at 1.60. Will it be able to break above this resistance line? The heavy volume on the stock last week was certainly a bullish indication. This tells us that there are a lot of people who are buying the stock and are absorbing all the sellers at current levels. If this volume continues to increase as the stock climbs higher, there may be a chance for the stock to even break above 1.60. Who knows? Maybe prices are already on its way towards the 2.00 level. For the meantime though, let's just expected the expected, which is for prices to encounter resistance at 1.60. Let the market prove us otherwise. Take note, looking at the chart above, if the stock does encounter resistance at 1.60, the stock may continue with its downtrend and even form a low, which would be lower than its previous low at 1.06.

The daily chart is where I am currently bullish on this stock right now. Prices have convincingly broken out above its resistance at 1.30 and has now reached a high of 1.46. It was able to survive a "down 283 points on the Dow" by holding above its support at 1.38 and is now retesting its previous high at 1.46. Although I wouldn't discount the possibility that prices may consolidate here at the 1.38 to 1.46 levels first for now, once prices have absorbed all the sellers at these levels, the stock may probably resume its uptrend. The fact that prices have been climbing on increasing volume is a very bullish sign. The big volumes tell us that this uptrend may be sustained.

Tsupiteros, who currently have positions in this stock, are recommended to just hold and use a break below 1.38 as your mental stop. Those who would like to buy this stock may want to buy as close to 1.38 as possible. For Position-traders, you may also want to buy as close to 1.38 as possible but just place mental stop on the break below 1.14. Will it be a good idea to take profits near 1.60? If the trend of this stock continues to be very strong, I would suggest that you try and not pick the highs. In my opinion, a better alternative would be to just take profits when the stock starts to drop back down.

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.