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Chart of the Week - October 20, 2008

 Vista Land & Lifescapes (VLL)

VLL Monthly Chart - Testing its Previous Low at 1.18

charts are courtesy of Metastock

VLL Weekly Chart - Broke Below its Support at 1.50, Downtrend Accelerates   

charts are courtesy of Metastock

VLL Daily Chart - Trading at Nearly Extremely Oversold Conditions, Approaching Psychological Support at 1.00

charts are courtesy of Metastock

Legend: blue lines - range for Tsupiteros

            dotted blue lines - range for Position Traders

            red lines - important trend lines

Vista Land & Lifescapes (VLL) was one of the weakest stock in the stock market last week. Not only is the stock being affected by the negative sentiment of the market and by sales of the foreign funds but is also being affected by the negative politics on its Chairman, Mr. Villar. Just in the last 15 days alone, the stock dropped from 1.88 to last Friday's low at 1.10. Could this stock even drop further, or, is it already a time to buy it?

You can see in the monthly chart above how severe this downtrend has been. From a high of 7.50 last July 2007, the stock has now lost 85% of its market value as of its close last Friday. With the stock now testing its previous low at 1.18, could the stock finally be able to rebound, if not form a reversal from here? The fact that prices were not able to rebound off its previous high at 2.55 is already not a good sign for the bulls, however, that doesn't mean that it can't rebound from current levels.

The weekly chart of the stocks shows that the downtrend of the stock has accelerated. Notice that prices ought to have rebounded off the 1.60 level, that is, if it were to follow its downward path, but it didn't. Last week, the stock broke below its downward channel and has accelerated downwards. Does this mean that prices will fall further from where it is right now? I don't know. While the stock is certainly oversold already from all its time-frames, the downward momentum of the stock is taking precedence over its being oversold at this point. From a weekly point of view, it is just almost impossible to tell where the stock will form a bottom since it is already trading at uncharted territories. Even if the stock manages to hold above its psychological support at 1.00, any rallies may be limited to the 1.60 level.

In the short-term, you can see that last Friday was now the fourth day in a row that the stock has formed a long black candle. Can it actually form another one? I am certainly not discounting that possibility, especially given the weakness of the market. However, I am presuming that the bulls may start to put up a fight with the bears starting from its psychological support at 1.00. Immediate resistances are pegged at the 1.30 to 1.40 levels.

So, how do we trade this stock? Do we simply buy it and hope that it rebounds? Yes, that is, if you really want to trade a stock that is trending down strongly. For those who would like to buy this stock, I would suggest to just buy it as low as you can. The lower the stock goes, the more likely that it will start to rebound already. However, the problem is, nobody knows how low this can go, given how weak it has been. While it is indeed extremely oversold already at this point, it is very difficult, if not almost impossible, to say where the stock will bottom-out. Therefore, I would only recommend this stock for more aggressive Tsupiteros. For the more conservative Tsupiteros, I would suggest to just look for another stock to trade. Why would anyone attempt to buy this one if it is a risky trade? Because the rewards may be worth it. With the extremity of the stock's downtrend, I am not discounting the possibility that it rebounds very, very strongly in the next few days. If the stock is able to form a bottom at current levels, I would expect prices to rebound back towards the 1.30 level, at minimum. If you are lucky, it may even rebound back to as high as 1.60. Remember, even if the stock rebounds back to as high as 1.60, the stock is still generally trending down, therefore, I would definitely not recommend this one to anyone who would like to position. Just hit and run!

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.