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Chart of the Week - March 16, 2009

Philex Mining Corporation (PX)

PX Monthly Chart - Established a Higher Low at the 3.85 Level but...y

charts are courtesy of Metastock

PX Weekly Chart - Broke Above its Resistance at 5.80,  

charts are courtesy of Metastock

PX Daily Chart - Strong Rally from 5.00 but Testing Resistance at 6.30

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

There are rumors that a proxy war is going in Philex Mining Corporation (PX) right now. I heard something about a proxy war between Walter Brown and Romulo Neri. In any case, the strength of the move the last few days makes me think that there is something definitely brewing in here. The price wouldn't break above its resistance at 5.80 if there isn't anything in here.

The monthly chart of PX shows that the stock appears to have formed a higher low at the 3.85 level. This higher low is confirmed when prices broke above its resistance at 5.80 last week. With the stock already trending up in this time-frame, does this mean that prices will form higher highs from here? While that certainly is a possibility, I would tend to think that prices will simply consolidate here between 3.85 and its previous high of 8.70. Since the stock has trended up for such a long time now from its major trough at 0.23 last 2004, I believe it will just start to consolidate for now within its range. Notice that the higher low was not backed up by significantly higher volume.

The weekly chart of PX shows the breakout of the chart above its resistance at 5.80. Whereas the stock used to trade between 3.85 to 5.80, the breakout above the 5.80 level indicates that its range has now shifted to 5.80 to 8.70. Unless the stock suddenly breaks back down below the 5.00 level, I would presume that its range has definitely been upgraded already.

The daily chart of PX shows the strength of the stock in the last few days. As of last Friday, the stock has already been climbing for seven consecutive days. Since the stock still forming a white candle last Friday, it may mean that this uptrend simply isn't over yet. However, notice that volume spiked up last Friday. There were approximately 20 million shares crossed last Friday. Could that indicate accumulation or distribution? I'm just not so sure. Furthermore, the stock is now currently testing its short-term resistance at 6.30 (blue solid upper trendline). Obviously, from a short-term point of view, the stock is quite overbought already, however, that doesn't necessarily mean that it will immediately go down. It may indicate though that prices may correct or consolidate first for now before it continues to climb higher.

Tsupiteros, who are currently holding this stock, may either want to start taking profits now, or, just continue to hold. If you opt to hold, I would suggest to use a break below the 5.40 level as your mental stop. For those who would like to buy this stock, I would recommend to buy it as close to 5.40 as possible. I would not recommend buying PX right now. If you are a position-trader and you are currently holding this stock, I would suggest that you just hold and look to take profits as close to 8.70 as possible. For Position-traders, who would like to buy this stock, you may buy it right now but be sure you could hold the stock even if prices drop to as low as 5.00.

The nice thing about what is going on in this stock is that this proxy war is just coming off from another proxy war in the market - MER. After what happened to MER because of its proxy war, some people are now betting that the same thing might happen here. I wouldn't discount that possibility but I would tend to think that what happened to MER was more of an exception to the rule.

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.