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Chart of the Week - July 14, 2008

 Pacifica, Inc. "A" Shares (PA)

PA Monthly Chart - Rallying from its Support at 0.05

charts are courtesy of Metastock

PA Weekly Chart - Testing its Major Resistance at 0.135 

charts are courtesy of Metastock

PA Daily Chart - Strong Uptrend but Prices may already be at an Extreme

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

Pacifica, Inc. "A" Shares (PA) climbed up spectacularly from its trough at 0.0525 just six days ago to a high of 0.125 last Friday. There weren't any disclosures in the PSE up to now as to why this stock climbed that way but I wouldn't be surprised if it climbed up for no reason at all. I guess with the stock having had a history of spectacular ascents, some Tsupiteros thought that history might repeat itself.

In the monthly chart of PA above, you can see that the stock has rebounded right at its historical support at around the psychological 0.05 level. Does this mean that prices are going to climb back up towards its previous high at 0.28? That certainly is possible, however, it will need to convincingly breakout above its medium-term resistance at 0.135 first. If you will look at the weekly chart of the stock above, there are quite a lot of resistances at the 0.11 to 0.135 levels, which can only be taken out if volume of transactions increase significantly. If you compare it with the past, the volume of transactions that it did this week was quite small. To be bullish, volume for the week needs to reach at least 3.5 billion shares changing hands. This week's volume was a mere 880 million.

In the short-term, while the stock is currently trading at a very, very strong uptrend, it is now trading at an extreme. Just imagine, this stock has already climbed up by 138% just in the last six days. Furthermore, the behavior of the stock last Friday wasn't exactly bullish anymore as prices gapped up to 0.115, climbed up to 0.125 but still ended the day at its previous close at 0.105. This behavior is called a bearish meeting line pattern in Japanese Candlesticks. The fact that it occurred after climbing 138% and after climbing by three straight days in a row, may be a bad sign for the bulls. While it still is holding above its support at the 0.10 to 0.105 levels, a break below this level may indicate that prices may possibly drop back down towards its support at the 0.0775 to 0.0825 levels. If the stock manages to hold above 0.10 to 0.105 on Monday, expect prices to consolidate between 0.10 and 0.125 for now. I really doubt though whether prices will be able to climb back up towards 0.125 on Monday.

Tsupiteros as well as Position-traders, who currently have positions in this stock, are recommended to take profits now. I would no longer recommend Tsupiteros and Position-traders to buy this stock at this point. I would only buy it again once it manages to form a higher low relative to its previous low at 0.0525.

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.