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Chart of the Week - October 6, 2008

 Splash Corporation (SPH)

SPH Weekly Chart - Continuing to Trend up but Testing Resistance at 6.20 

charts are courtesy of Metastock

SPH Daily Chart - Continuing to Trend Up Strongly

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

Splash Corporation (SPH) has been one of only a handful of issues that has bucked the trend of the market recently as prices have already climbed more than 75% in just one month time. This ascent was triggered when the company announced a P200M buyback program last Sept 17, 2008. The program will be implemented in the next 90 days. The stock was bid up further when the company announced an MOU with IDS Philippines last Sept 29, 2008. Of course, the movement is really extraordinary because a lot of stocks have buyback programs and other positive disclosures yet not one of them has moved like how SPH has moved. The big question now is, with the stock already having climbed so much in such a short period of time, can it continue climbing further or is this the end of the run for the stock?

Obviously, the stock is now trending up in the short-term as well as in the medium-term. However, since prices have gone up so high already in just the last one month, it's a bit tricky to say if the stock will still go higher or not. The weekly chart of the stock above shows the stock's pivot points or the levels, which act as the stock's major support and resistance lines. These levels are the following: 3.45, 6.20, 8.40 and it's all-time high at 9.00. If you'll notice, the stock is now just one fluctuation away from one of its pivot points at 6.20. Does this mean that the stock will encounter resistance at current levels? Not necessarily. If the stock were going to encounter resistance at the 6.20 level, sellers ought to have anticipated this and have sold down the stock well below the 6.20 level. The fact that prices have closed the day and the week at the 6.10 level, tells me that prices could possibly break above this resistance line at 6.20. If the stock is going to break above 6.20, does that mean the prices will now head straight towards its next pivot point at 8.40? Not necessarily as well. If prices are able to break above 6.20, that simply means that it has overcome a major resistance line in the chart and that prices could potentially climb further. It does not guarantee though that prices will climb up to as high as 8.40. But, of course, if the stock could break above 6.20, an ascent towards 8.40 would now become a possibility.

Tsupiteros, who are lucky enough to have bought this stock at lower levels and are still holding, are recommended to just hold and just use a break below 5.70 or 5.80 as your mental stop. Notice in the daily chart of the stock above that, for the last 10 days in a row, the stock is always climbing with a long white candle is always being closed at its highs for the day. I would start getting worried for the bulls if the stock no longer closes at its highs and no longer forms a long white candle. With prices already at such a very high level, I would no longer recommend Tsupiteros to buy this stock at this point. I may decide to buy it though if prices drop back down to its previous low at 4.80. Would it be a good idea to start taking profits now. Maybe but, from my experience, when stocks are trending as strong as this one, I usually still end up selling at a higher price if I just sell the stock on the way down, as compared with trying to pick its highs.

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.