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Chart of the Week - December 15, 2008

  Petron Corporation (PCOR)

PCOR Monthly Chart - Uptrend Ends

charts are courtesy of Metastock

PCOR Weekly Chart - Testing Resistance at 5.80   

charts are courtesy of Metastock

PCOR Daily Chart - Correcting back down from its Peak at 5.80 but...h

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

Petron Corporation (PCOR) was one of the strongest stocks in the whole market last week on news that San Miguel Corporation (SMC) was going to take over Petron Corporation. The news stated that SMC was going to buy 51% of the outstanding shares of PCOR from the Ashmore Group at P6.85 per share. This represents a 22% premium from current levels of the stock. Does this mean that the stock will eventually head back up to 6.80? Do the charts indicate a move back up to 6.80?

The monthly chart of PCOR is not exactly the most bullish chart in the world. In fact, it would seem to me that the uptrend of the stock, which began in the year 2000, has already ended this year. Notice that in the last upswing of the stock, while it was still trending up in 2007, it no longer reached its resistance at line. That was already a warning sign for the bulls. The next warning sign came in the middle of this year when the stock no longer climbed back up to its previous high at 7.40 and already formed a lower high at the 6.50 level. The breakdown below its support line last October was the confirmation that its long-term uptrend has indeed ended already. Does this mean that the stock will now begin to trend back down? Not necessarily. I only know that the stock's uptrend has ended but there is that possibility that the stock will merely consolidate in a range for now.

The weekly chart of the stock gives hope for the bulls but remains determined for the bears. What do I mean? The chart give hope for the bulls because it not only has broken above its resistance at 4.35 but also its previous high at 5.30. If the stock were really weak, it should have already trended down when it broke below its previous low at 4.35. The fact that it didn't and prices were able to climb back up to 5.80, give hope for the bulls that prices may possibly head back up towards its previous high at 7.40. On the other hand, the stock remains determined for the bears particularly because prices appears to have established resistance right where the bears expect prices to hold, the 5.80 level. Notice in the weekly chart above how the converging trendlines have acted as resistance for the stock. Could it be that prices will head back down to 4.15 from here? While that certainly is possible, I don't think that will easily happen without the bulls giving the bears a good fight at the 4.80 to 5.30 levels. Remember, a lot of people have been left out of the recent up move in PCOR. These people will now be looking to buy in its next correction.

The daily chart is the time-frame that is giving a lot of hope for the bulls. As I said, with the way the stock climbed from 4.30 to 5.80 last week, a lot of people will be looking to buy the stock on its next correction, which is actually happening right now. I'm pretty sure prices will not easily drop back down to 4.50, however, whether the stock could manage to hold above its support at 5.30 is still a bit uncertain at this point. While prices may drop back down to 4.80 and still look bullish in the short-term, a shallower correction from its peak at 5.80 will bode a lot better for the bulls.

I can't blame Tsupiteros if you took profits in this stock in the last few days. However, I would suggest to try and buy back your positions in this stock on this current correction. Take note, if the stock already holds support at current levels, I would expect prices to climb back up to 5.80, if not form another higher high above 5.80. However, if the stock drops to as low as 4.80 in this current correction, the next time that it climbs, it may already encounter resistance at around the 5.30 to 5.40 levels. I'll be damned if the stock drops straight to 4.50 from here. If it does, I would suggest to already sell your positions on strength. Would it be a good idea for Position-traders to buy this stock right now? With the stock expected to just consolidate at best in the medium and in the long-term, I would not recommend Position-traders to enter this stock right now. The best that this stock can do in the medium or in the long-term is to consolidate between 4.15 and 7.40.

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.