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Chart of the Week - Mar 10, 2008

Philex Mining Corporation (PX)

PX Monthly Chart - Strong Uptrend, Bullishly Consolidating at its Highs

charts are courtesy of Metastock

PX Weekly Chart - Trading at the Apex of Triangle 

charts are courtesy of Metastock

PX Daily Chart - Consolidating, Appears to have Formed a Peak at 7.70 

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

Philex Mining Corporation (PX) has been one of only a handful of stocks that has managed to buck the downtrend of the market for the last few months. This is due obviously to the very strong performance of metal prices in the world markets. And because PX is the only real mining company in the entire PSE (other companies merely claim that they are into mining), people have no where else to go but to buy this stock in order to participate in the mining bull market. Just recently, the company announced a 30% stock dividend and, of course, the price adjusted accordingly. However, I think some people got a bit confused by the price adjustment so the price jumped on the ex-date, thereby resulting in a temporary spike. For those who exited the stock on that day, congratulations to you. For those who entered the stock on that day, you may have to bear some volatility in the short-term before, hopefully, it eventually comes back up.

You can see in the monthly and weekly charts of PX above that the stock is in a very, very strong uptrend with no signs that it is toppish yet. The 6.00 level appears to be where the major support of the stock is. Therefore, as long as prices hold above this 6.00 level, I will continue to be bullish on this stock for the medium and for the long-term. If we follow the trend of the stock in its weekly chart, next resistance will already be at around the 13.50 level. But if we follow the trend of the stock in its monthly chart, next resistance will already be at around the 20.00 level. This doesn't seem impossible given that the price of metals in the world market continue to be very, very strong and PX is still fundamentally very cheap. Of course, the risk is that metal prices might start to become toppish and that the company might run out of reserves to mine. There was news recently that its highly anticipated Boyongan mines was not feasible. This property ought to have given the company its additional revenues in the future. The good news is the company has built up a huge cash reserve to possibly just buy something else to provide its revenues in the future. 

For the short-term, the stock's trend is quite confusing and volatile. It has been trading between 6.10 and 8.70 for the last four and a half months now. The daily chart of the stock above shows that it is now trading within a symmetrical triangle formation as highlighted by the blue solid converging lines. Symmetrical triangles indicate that the forces of the bulls and the bears are just about equal. Just recently, because of the confusion of the public with regards to the adjustment of its price because of its 30% stock dividend, the stock attempted to break above the symmetrical triangle but failed. That resistance line of the triangle is currently at the 7.70 level. If the stock has indeed formed a short-term peak already at the 7.70 level, we can expect prices to eventually drop back down towards the support of the triangle at around the 6.50 to 6.60 levels. I would continue to expect this up and down movement from PX between 6.50 and 7.70 unless volume of the stock suddenly increases significantly and the stock is able to breakout above 7.70.

Tsupiteros, who are looking to buy this stock, may want to buy as close to 6.50 as possible, with mental stops placed on the break below 6.00. Those who are currently long, may want to use a break below 7.20 as your mental stop and just try to buy it lower to decrease your cost. Position-traders, who do not mind using counter-trend trading strategies, may also want to buy as close to 6.50 as possible. Just be aware that if you are buying this stock for the medium to long-term, you might experience some volatility along the way before it eventually climbs. This is because there is still no trend in the short-term. Strictly speaking, I'd rather wait for the trend to manifest itself before I use a buy and hold strategy for this one. For the meantime, I would simply buy the dips and sell the rallies.

Good luck mining bugs!!!

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.