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Chart of the Week - July 27, 2009

 NiHao Mineral Resources Int'l, Inc. (NI)

NI Monthly Chart - Breaking Above its Resistance at 10.00?n

charts are courtesy of Metastock

NI Weekly Chart - Approaching its Resistance at 12.00 

charts are courtesy of Metastock

NI Daily Chart - Strong Uptrend but...n

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

NiHao Mineral Resources Int'l, Inc. (NI) had the most stellar performance in the entire stock market last week. It's previous close last, last Friday was just 7.00. Last Friday, it closed at 10.75 or a more than 50% increase in its price in just one week's time. Obviously, something's going on out of the ordinary. There was a disclosure last Tuesday regarding its stock rights, which the company is planning to push thru already on October. Could this be the reason why it went up a lot? Or, maybe the big boys are simply playing while the cat (or rather the bear) is away.

With regards to its monthly chart, I have highlighted in that chart the important pivot line for the stock, which is the psychological 10.00 level. As long as prices stay below that line, one should be bearish on the stock. If prices go beyond that line, then, one should be bullish. With the stock closing the week at 10.75, could it be possible that the stock is now bullish in the long-term? Sure, but, remember, I am talking of the monthly chart here and the month (July) hasn't ended yet. What I would like to see is a monthly close above that 10.00 level. If the stock could do that, then, quite possibly, the long-term bulls of this stock could now have a chance.

As to its weekly chart, you can see that, while the stock looks quite strong in this time-frame, it is now approaching its previous high at 12.00. Will it be able to break above this level? With the stock closing the week at its highs and with a long white candle, I would tend to think that the stock will continue to climb up further this coming week. However, it certainly will no longer climb by another 50%. I would be guessing by saying this but I would tend to think that there is a possibility that the stock will simply move sideways this coming week since prices have already gone up too fast, too soon. The stock will need to absorb all those who would like to sell at these levels first before it continues to move up, if ever.

Let's move one time-frame lower and analyze the stock's daily chart. The stock has already climbed up by five straight days in a row and, aside from its candle last Friday, have formed a long white candle for each day of its ascent last week. Even without looking at any oscillator, one would obviously assume that the stock is now trading at extremely overbought conditions. While prices may continue to trend up indefinitely in a strong trend, it's behavior last Friday wasn't exactly very bullish anymore. If you'll notice, the stock had its biggest volume in the last five days last Friday. However, despite the huge volume, last Friday registered the smallest percentage gain that the stock did in the last five days. Notice also that, unlike in the last four days, the stock no longer closed the day at its highs. This behavior would tell me that the stock's uptrend is now getting tired and will probably need to rest in the short-term. I wouldn't be surprised if the stock tries to continue climbing higher on Monday but I doubt if it can still form another long white candle.

How do we trade this stock? Medium-term traders, who currently have a position in this stock, have two choices: you either take profits on strength right now and hope to buyback your positions if the stock goes back down; or, just hold and place mental stops on the break below the 8.60 level. For those who would like to buy, you may want to buy it as close to 8.60 as possible. 8.60 was the previous high of the stock, thus, if the stock is really strong, it should no longer drop below that level. As for Tsupiteros, you too have the option of either holding on to your position or start taking profits but, definitely, I would not recommend to anyone to buy this stock at current levels.

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.