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Chart of the Week - Sep 8, 2009

 Minerales Industrias Corporation (MIC)

MIC Monthly Chart - Upswing Continues 

charts are courtesy of Metastock

MIC Weekly Chart - Broke above its resistance at 3.50 

charts are courtesy of Metastock

MIC Daily Chart - Broke above its resistance at 4.00 but now Overbought

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

JAP stocks have been in the limelight recently because of their huge ascents in the last couple of weeks. I guess most people were thinking that GEO or NI might be where the real play is but I don't think a lot expected Minerales Industrias Corporation (MIC) to perform as well as it did.

The monthly chart of the stock shows that prices are continuing to swing up from its trough at 1.60. The previous peak of the stock in this time-frame is 11.50 level. Although the stock is very, very strong right now, I doubt whether prices have the capacity to climb straight towards 11.50 from here. A rally towards the 5.50 to 6.50 levels may be the best-case scenario that I can see for this stock in this time-frame.

The weekly chat of the stock have begun to turn last week as prices have convincingly broken out above that major resistance at 3.50. If we look at the weekly chart of the stock above, the next big resistance will now come at the 6.00 level. Observe the volume of the stock in the left side of the chart and its volume in the right side of the chart. If you will notice, there is a huge difference in volume. This means that there are a lot of people who got stuck with this stock in 2007 and may become a source of resistance for this stock as prices climb higher. If I'm not mistaken, these people will start to "appear" if prices are able to climb up towards the 5.00 to 6.00 levels. Of course, there are now also those who sold near the 3.50 level. These people who sold at that level will be the ones to support this stock if prices drop back down instead.

In the short-term, you can see in the daily chart above that prices are trending up very, very strongly right now. It broke above the psychological 4.00 level and has ended the day and the week with a bullishly looking long white candle. While the stock may be a bit overbought already right now, I wouldn't be surprised if the stock still continues to climb towards the psychological 5.00 level.

So, how do we trade this stock? Tsupiteros, who are currently long in this stock, you may just opt to hold and just use a break below the 4.00 level as your mental stop. For those who would like to pick the top, you may want to take profits as close to 5.00 as possible. For those who would like to buy this stock, you may want to buy it as close to 4.00 as possible. I wouldn't chase this one anymore though if prices continue to climb up on Tuesday. As for Position-traders, you may want to buy it as close to 3.50 as possible and try targeting the 6.00 level as your level to take profits.

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.