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Chart of the Week - October 13, 2008

 Philodrill Corporation (OV)

OV Monthly Chart - Reversing from its Peak?1

charts are courtesy of Metastock

OV Weekly Chart - Clinging to its Support at 0.024   

charts are courtesy of Metastock

OV Daily Chart - Encountering Resistance at 0.025

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

After four months of delay, the Galoc consortium finally announced the much anticipated flow of "First Oil' last Thursday. Philodrill Corporation ( OV), which has a 7% stake in the consortium, climbed up from 0.021 to 0.025 last Wednesday. Obviously, the news leaked to some traders as they bid up the stock aggressively one day before the announcement. However, unlike what some people were expecting, the news did not result in fireworks to its stock price. Since everybody has been expecting this news for the last four months now, the news has already been discounted by the market. Furthermore, the weakness of the entire market affected its price as well. I have to say, the insiders of this stock have such impeccable timing! So, with "First Oil" already announced, is there anything more to look forward to in this stock?

The monthly chart of OV above is certainly not the most bullish chart in the world. First of all, it is trading near its previous high at 0.0305, which was registered in December 1993. Secondly, prices appear to have already broken below its upward channel and seems like has started to taper off. The best that we could hope for in this time-frame is for prices to continue to move sideways just below its high at 0.036. I just can't see it forming another new high anytime soon. The worst that could happen is that prices may start to trend down from here.

The weekly chart of OV above shows that the stock is currently moving sideways between 0.024 and 0.036. The past week gave a bit of a scare to the bulls as prices broke below its previous low at 0.024 and dropped to as low as 0.021. Just as prices broke down below its support, an arch angel suddenly came down from heaven and announced "First Oil", thus, catapulting the stock back up above the 0.024 level. At this point, the stock is now in a make or break situation. The stock will either hold above current levels and rebound back up towards its previous high at 0.036, or, it will continue to trend down and possibly head towards its previous low at 0.015. Whatever happens, the stock will definitely not stay at current levels for long.

The daily chart of OV above shows that the stock has been in a continuous downtrend in the short-term. The announcement of "First Oil" was thought to have been the trigger to reverse prices from down to up, but unfortunately, it hasn't happened yet. Notice that prices appear to already be encountering resistance at the 0.025 level. If prices do hold below the 0.025 level, I would expect prices to continue trending down and form another lower low lower than its previous low at 0.021. If prices do hold below the 0.025 level, despite the announcement of "First Oil", it would indicate that the stock is very weak and could potentially even accelerate to the downside. The big volume on the stock last Friday is a bit deceiving. Because the news on the flow of "First Oil" from the Galoc project was only in the newspapers last Friday, the public probably bought on the news that day. To at least stabilize this downtrend in the short-term, prices must first be able to convincingly breakout above that 0.025 level.

I can't blame Tsupiteros, who sold their positions in this stock last Friday on the announcement of "First Oil". For those who are still holding, I would suggest that you observe the price action in the next couple of days. If you think that prices will not be able to pierce thru that 0.025 resistance line, I would suggest that you sell as well. Would I suggest buying it if prices break above 0.025? Maybe but, in my opinion, that may be a bit risky, especially in this environment that the market is in right now. How about for Position-traders? Would it be wise to sell your positions as well? The stock is now in a make or break in the medium-term at current prices, therefore, if the stock still not able to hold above its low at 0.021, I'm afraid it may start to trend down. I can't blame some Position-traders if you they sold when prices broke below its previous low at 0.024. For those who are still holding, I would suggest to just use a break below 0.021 as your mental stop. How about for those who would like to buy this stock? I would only buy this stock if prices begin to trend up in the short-term once again. That will only happen if prices are able to climb back up towards the 0.029 level and then form a higher low. Unless that happens, I wouldn't recommend buying it.

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.