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Chart of the Week - December 1, 2008

  Megaworld Corporation (MEG)

MEG Monthly Chart - Approaching Historical Support at around 0.41

charts are courtesy of Metastock

MEG Weekly Chart - Appears to be Holding Above its Support at 0.50,  Big Volume may Indicate Accumulation   

charts are courtesy of Metastock

MEG Daily Chart - Strong Rally but Still Just Consolidating Within a Sideways to Downward Trend

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 the highlight of the PSE last week as the stock continued to drop in the early part of the week, despite the strong showing of the whole market already. News that the stock would be taken out of the MSCI Index prompted foreign funds to dump the stock last Tuesday. However, the local players simply knew better as they gobbled up everything that the foreign funds had to offer. After that day, the stock just never looked back as the stock has climbed for three consecutive days in a row and still looks very strong up to last Friday. Could MEG finally have hit rock bottom already right now?

In its monthly chart, you can see that while the stock is still trending down, it is now approaching its historical support at around the 0.41 level. The 0.41 level is its low during the Asian Financial Crisis. With the stock already registering a low of 0.50, it was just 0.09 cents away from that low. Will the stock be able to hold above that low and bounce? It's very difficult to say but, I would have to say that if there was any point in MEG's chart where the stock will likely bounce, this should be it.

The weekly chart of MEG is quite interesting right now. You can see that last week was the first week in a long time that MEG was able to close the week with a white candle. Notice that prices bounced off right at its medium-term support line, which was currently at 0.50. Notice also that it appears to have bounced off a psychological number at 0.50. Finally, notice also the huge volume of the stock last week. In my opinion, these indications tell me that the stock is now ready to bounce. Where to? Well, the resistance of the stock in its medium-term time-frame is the psychological 1.00 level but I'm just not so sure if it could climb up to that level. There is a pretty good chance though for the stock to climb up to as high as 0.75.

The short-term picture of the stock is also quite interesting. After hitting a low of 0.50 last Tuesday with 678 million shares changing hands, the stock appears to have formed a V-reversal and has began to trend up. While the stock is still trading within a sideways to downward trend, as can be seen by the blue solid parallel trendlines, its very short-term trend looks quite promising. With this strong of a trend in its very short-term time-frame, I would tend to think that the stock will be able to reach its resistance line at 0.75 in the next few days' time.

I sure hope Tsupiteros, who were able to buy this stock when it hit 0.50, are still holding on to your positions in this stock. For those who are looking for an entry in this stock, I'm afraid it might be a bit risky already right now. With the stock already climbing almost 25% from its low at 0.50, it might be vulnerable to a correction already right now. However, I would advise those who would like to buy this stock to buy it on its next correction. For Position-traders, I would advise to just follow what the Tsupiteros are doing and look to enter the stock on its next correction. As long as prices hold above its previous low at 0.50, I think there are pretty good chances that the stock has formed a bottom already at this point.

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.