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Chart of the Week - Jun 30, 2008

 Philodrill Corp. (OV)

OV Monthly Chart - Trying to Break Out Above its Previous High

charts are courtesy of Metastock

OV Weekly Chart - Uptrend Looks Poised to Continue 

charts are courtesy of Metastock

OV Daily Chart - Formed a Trading Range of Between 0.028 and 0.036

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

Philodrill Corporation (OV) has been one of only a handful of stocks that was strong last week on the back of another record high on the price of oil in the world markets and the upcoming first production of oil from the Galoc project.

In the long-term, you can see in the monthly chart of OV above that the stock is now trading at a new all-time high, that is, based on my historical database dating back only from 1984. Its previous high was set last 1993 when it hit at a high of 0.0305 (adjusted because of the change in par). At current prices, while the stock is obviously trending up, it is in a bit of a consolidation. For sure, a lot of the all-timers, who got stuck at these prices from more than 10 years ago, may have been sellers in the last couple of months. However, the fact that it has been a couple of months now that the price has been hovering at these relatively high levels and it is still holding on to its gains. In my opinion, once all the sellers at these levels have been absorbed by the market, that will be the time when the stock can make another new high.

In the medium-term or in the weekly chart of OV above, you can see that the stock has been trading within a fairly clean upward channel. There has been some hesitation on the price in the last couple of months but, generally speaking, it has been uphill eversince. If the stock continues to follow its trend, I wouldn't be surprised to see prices hit its medium-term resistance at 0.040 in the next few weeks. Support in this time-frame is pegged at the 0.025 level. From a medium-term perspective, the last couple of weeks' decline is nothing but noise in this time-frame.

For the short-term, with the Galoc project being hounded by a couple of delays already in its first production of oil, OV was sold down from 0.036 to 0.028. I guess the bearish sentiment in the market also has a lot to do with this decline. However, with the stock breaking above its minor resistance at 0.031 last Friday, the stock has now established support at 0.028 and now looks poised to retest its previous high at 0.036. While the stock may eventually break above its previous high at 0.036, I wouldn't be surprised if the stock consolidates first for now around current levels. With the way the stock dropped from 0.036 to 0.028, I would bet that there are a lot of people who bought at lower prices and are looking to take profits as close to 0.036 as possible. Couple that with the fact that there are also a lot of people who got stuck the last time it went to 0.036 and, what you get is a pretty formidable resistance line at the 0.036 level.

For Position-traders looking for an entry in this stock, you may want to buy the dips right now and just place mental stops on the break below 0.028. On the other hand, Tsupiteros may also want to buy the dips already in this stock. If this stock is really strong, it should no longer break below 0.030. For those who prefer using counter-trend trading strategies, you may want to sell as close to 0.036 as possible. Just be sure you know how to buyback higher if in case the stock continues to climb up after you have sold.

Take note, with the price of oil continuing to form record highs and the Galoc project expected to announce its first production of oil by the end of this week, there is no reason for OV to drop back down to 0.028 anymore. If, for any reason, the stock trades back down to 0.028, I would already start getting worried for the bulls in this stock. Otherwise, it should be all uphill from here. One last thing that the bulls should be worried about is a possible peak in the price of oil. For the meantime, just dumbly follow the trend.

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.