CAL Fever and Fibonacci

Barely two weeks old since it went public via IPO, CAL (Calata Corp.) has been the hottest thing since Jessica Sanchez and Renato Corona, at least for stock traders. And why not? CAL has gone up significantly to more or less 300% and (as of this writing), its momentum still hasn't waned down.

Since CAL is a newcomer in the PSE, there are basically no technical indicators or chart patterns to follow. It's also a generally unknown stock or company (don't lie, you never heard or know of Calata before the buzz of an IPO) so fundamentals might not also work.

Just like most IPOs, CAL was selling like hotcakes a day or two after it went public. It's a very common trait for Filipinos to flock into something new. Proof? Have you seen how crowded Krispy Kreme stores are  and SM Consolacion when it opened? People just want to either have the first hand experience of something new or the first story to tell.

Well, going back to CAL, the jockeys came in and soon, the euphoria. Without any technical indicators, chart patterns, support/resistance levels, and financial statements, how should CAL be traded?

Fibonacci is a very popular and might be an underused or misunderstood concept. In its simplest terms, Fibonacci is simply adding the two previous numbers in order to come up with the next one. Here's an illustration of Fibonacci:

1, 2, 3, 5, 8, 13, 21, 34, 55, 89, etc

The computation is fairly simple: Add 1 and 2 to come up with 3. Next is to add 2 and 3 to come up with 5. Next is adding up 3 and 5 to come up with 8. Simple isn't it?

How is this related to CAL? Here's CAL's daily price action:

Day [1] 7.30 to 7.67 (+0.37)
Day [2] 7.34 to 7.50 (+0.16)
Day [3] 7.50 to 7.90 (+0.40)
Day [4] 8.06 to 9.40 (+1.35)
Day [5] 9.67 to 11.41 (+1.74
Day [6] 11.53 to 13.92 (+2.39)
Day [7] 13.92 to 16.98 (+3.06)
Day [8] 17.01 to 22.06 (+5.05)

Since Day 3 until Day 8, it's Fibonacci at work!! With that being said, considering that CAL's momentum remains the same (bid side ten times thicker than the sell side), CAL may add +8 points to it's value (3.06 + 5.05). CAL at 30, isn't that great?

Math and numbers never lie. The good thing about CAL is its predictability. Despite the lack of chart patterns and technical indicators, CAL remains so easy to read.

Just a word of caution: Just because CAL has been following Fibonacci almost ideally doesn't mean that it will continue to do so. Take note that this stock has already gone up by more or less 300% so profit taking is just around the corner.

PXP: Round 2

PXP is primed for another strong run. It may not be as strong as its run before but it will be still strong enough to make many traders happy.

Below is PXP's chart.

Despite the bearish market, PXP held its own. It has gone up from 24ish to more than 31 in 4 days and as far as its price and indicators are concerned, it's not yet done.

PXP's momentum is pretty good and is consistent. It is being backed up by good volumes and its STS is showing some strength. It's RSI is still far from being overbought and is indicating good strength.

On the fundamental side, PXP CEO Manny V. Pangilinan has announced PXP and China National Offshore Oil Corp.'s (CNOOC) partnership to drill the disputed area. It was being reported weeks ago that Pangilinan headed to Beijing to meet CNOOC's management for a possible partnership. Pangilinan described the meeting as "cordial and productive".

Below is the list of PXP's buyers and sellers during the past 5 trading days (May 14 to May 18).

Traders from reputable brokers Macquarie and Deutsche bought lots of PXP shares and sold none. Both Macquarie and Deutsche are consistent buyers of PXP over the week.

The magic number to look at is 34 as many traders think that PXP's face value is pegged at 34.

Oil is starting to gain momentum once again. Apart from PXP, OV has gained good momentum as well.

Dow Jones is on a strong downtrend and that should rub off to PSEi. Index stocks are something that should be avoided short term but it poses a good entry for long term positions. For short trading, second liner stocks and the oil sector in particular is worth looking.

Wild card stocks for short trading: MARC. It has gone down significantly already and is rebound bound. Other mining stocks ORE and NI are worth looking as well. ORE's 100-day SMA has become its resistance and 10 became NI's resistance.

PSE Index

From an all time high of more than 5,300, the Philippine Stock Exchange Index plunged back down to as low as 5,158.14 (May 11's close). This could be viewed as a healthy correction as most index and non-index stocks have already gone up significantly prompting people to take profits.

However, aside from the profit taking, PSEi's plunge was also probably caused by several reasons.

*JPMorgan (JPM) reported a $2 billion trading loss and in the process, has lost $15 billion of its market value. Fitch Rating has lowered its rating for JPMorgan from F1+ to F while Standard and Poor's (S&P) has cut JPM's rating from A+ to AA-. S&P has cited that there could be a possibility of broader hedging problems which the credit rater said isn't "consistent with what we have viewed as the company's sound risk-management practices". Federal Reserve officials are now conducting an investigation on the trade position that led JPM to such loss. JPMorgan is the largest and most profitable bank in the U.S. and its CEO, Jaime Dimon, has been lauded during the 2008 financial crisis after steering the company through the hard times without reporting losses.

*Europe's financial woes is not getting any better. European stocks continued to fall for another week after political parties in Greece failed to form a government after its election raising concerns about the country's ability to implement austerity measures. Voters in Greece flocked the anti-austerity parties during the May 6 elections. Another election might be held again next month and the standoff has reignited the European concern over Greece's ability to hold to the two bailouts negotiated since May 2010 and has sparked the idea of the country leaving the euro.

*The tension between China and the Philippines over the Scarborough shoal is not getting any better. Chinese agencies has suspended travels to the Philippines and advised Chinese citizens in the Philippines to avoid conflict with the locals (Filipinos). China also accused Philippines for escalating the already tense territorial dispute over the South China Sea after a noisy but peaceful anti-Chinese protest in Manila. In addition to suspending travel to the Philippines, China has also imposed stricter implementation on bananas, pineapples, and other fruit imports from the Philippines.

JPMorgan's shockingly poor performance and the worsening Greece and European crisis has pushed Dow Jones to perform poorly. The tension on China on the other hand has caused concerns and affected several business ties with the Philippines. Nothing is more hit badly than the mining stocks, particularly nickel. Philippines is one of China's top nickel supplier and after Indonesia has stopped shipping low-grade nickel, Philippines has earned the lion's share.

Will this change the current sentiment (uptrend)? Philippine based companies continue to hold strong outlooks and in fact most stocks are still considered undervalued. The PSEi weakening might just be short term and will open more buying opportunities and send stocks back down cheap.

Below is PSEI's chart.

PSEi is currently on its trend support and very near its 32-day SMA. If the rift between China will no longer get worse, PSEi ma bounce back up anytime and hit a new all time high.

Mining stocks, though most are cheap, are something to be avoided as of the moment not until the sentiment returns. NI has already recovered but momentum is still not strong. ORE, MARC, and DIZ have corrected heavily and are cheap increasing their growth and momentum potentials.

Other sectors worth looking are the holdings, properties, and financial sectors.

Index Stock Pick of the Week: EDC

Big things could be expected from EDC soon. EDC and Hot Rock Ltd. of Australia has signed joint venture deals for Latin America projects. In a disclosure sent to PSE, EDC said the agreement will set up projects for Longavi concession in Chile, and the Chocopata and Quellaapacheta geothermal authorizations in Peru. Under the signed SHA (Shareholders' agreement), EDC will hold 70% of the outstanding capital stock of each project while HRL (Hot Rock Ltd.) will take the remaining 30%. Hot Rock Ltd. is an Australian energy company formed to develop geothermal energy in Australia and overseas.

Hot Rock Ltd.'s website described EDC as "the world's largest integrated geothermal company". Here's the company's website: Hot Rock Limited

Below is EDC's 18-month chart (October 2010 until April 2012):

EDC's resiliency kept it from falling further after forming a head and shoulders pattern. Instead of sinking, EDC bounced from the foot of the shoulder and went back up.

Below is EDC's chart since the bounce:

What's noteworthy about EDC's chart lately?

1.) Price action has been steadily going up. From a low of 4.8, EDC went back up to as high as 6. That's 25% in just a matter of two months.

2.) Since the bounce, volume has been good. Turnover normally reaches around 20 million shares a day. Not bad for a price that is trading above P4.

3.) EDC's momentum is so good. The 20-day SMA broke past the 50-day and 100-day SMAs (encircled in green).

4.) For short term play, the indicators are showing signs of bullishness.

Other than the charts, why EDC?

From April 30 until May 4, here are the net number of EDC shares owned by several brokers:

DBP-Daiwa Securities - 5.5M (P32.6M)

SB Securities - 4.4M (P26M)

ATR Kim Eng Securities - 2.9M (P16.9M)

Philippine Equity Partners - 1.7M (P10.2M)

Macquarie Securities - 1.1M (P7.1M)

Abacus Securities Corp. - 1.7M (P10.2M)

Angping and Associates Securities - 1.5M (P8.9M)

JP Morgan Securities - 1.7M (P10.2M)

*JP Morgan Securities never sold a single share since April 30 until May 4.

EDC has only gone up from 5.9 to as high as 6.05 and settled for 6 in 4 trading days, the chance of heavy selling might be slim considering the fact that these brokers are most likely accumulating EDC.

Buying price: P6 or below

Target price: For short term, anything above 2% to avoid commission loss but for mid or long term, EDC is expected to hit P8 or even higher.

Dow futures are down by triple digits, EDC may go lower than 6 early next week.

Pick of the Week: TEL

The Philippine Stock Exchange Index has been sluggish for the past week or two despite the strong finishes and price movements of most of its listed stocks due to the fact that TEL (PLDT), the Philippines top and leading telecommunications company, is on a downtrend. TEL has a huge influence on the stock market index.

Below is TEL's chart:

TEL is bound to bounce for the following reasons:

1.) It's price is currently at its trend support.

2.) Major indicators MACD, RSI, and STS are all low (so low for that matter). Low or oversold indicators always bounce back up. Volume is good as well, stock is active.

3.) Despite the massive sell off, huge brokers such as ATR Kim Eng Securities, Thing-on Securities Ltd., SB Securities Inc., DBP-Daiwa Securities, Regina Capital, Papa Securities Inc., and First Orient Securities bought huge number of TEL shares.

Quotes that may fit TEL well:

"Sell when everybody is buying and buy when everybody is selling"

"Buy on fear, sell on greed"

The sell off could still be the effect of lowering of PLDT's credit rating by Moody's. So caveat.

Nevertheless, TEL is worth watching.

Target entry price: P2,550

Target sell price: P2,700 (5.88% upside minus commissions and fees)

Target cut loss point: P2,500 (psychological support)

Index Stock Picks (Apr. 17-21): MEG, RLC, and URC

MEG, RLC, and URC's charts are looking great and are primed to go further north this week. Here are the charts of the three stocks:

RLC:

After breaking 17, RLC has been consolidating and moved sideways for more or less 3 weeks. It made 17 its psychological resistance. RLC had its first major price action in 2-3 weeks which may prompt a possible breakout. If RLC will break past 17, it will most likely post a new high. Unchartered territories are were stock prices surge fast. RLC's STS also indicates strength. RSI is not yet overbought and volume is good.

Buying Price: 17 or below (ideally 16.8 or lower)

Selling Price: 17.45 or higher

URC:

If URC breaks its resistance at 65, this is primed to break out. This has been consolidating for quite some time already and is ripe enough to go back up. Price action, volume, STS, and RSI are all positive. All we have to do is to wait for URC to go higher than 65. As shown in the chart, URC is also on its 20-day SMA which can also be considered as a support.

If 65 is broken, URC will be on a new all-time high.

Buying Price: 65 - 65.5 (as long as it is with good volume)

Selling Price: Whenever you are comfortable (be sure its higher than 2% to avoid commission loss)

MEG:

For a stock like MEG, its quite puzzling why did it continue to go down despite its good fundamentals and outlook. Looking at the bright side, it has brought the stock to a very undervalued level.

However, MEG already broke out from its downtrend resistance for nearly 2 months already and is starting to gain some serious momentum. Below is MEG's short term chart.

MEG has bounced from its uptrend support and at 61.8% Fibonacci (check it out). Price gradually went up in the last 2 days and a strong price is very probable within the week. RSI is still far from being overbought and STS may cross up. MEG's volume is also good and may increase if price will surge.

Buying Price: 1.97 (if price will gap up, 2 or lower)

Selling Price: 2.1

Stock Pick: PXP

The oil sector has been exemplary well this year. Stocks like OV and OPM (considering that these are third liner stocks) went up by leaps and bounds. Oil stocks have high face values and are expected to continue to go up. One stock in the oil sector is PXP.

The chart below is PXP's chart since its IPO last September 2011. Since it retraced from its crazy day 1 price action, PXP has gone up from P4 to as high as P14 in just a matter of roughly 5 months.

Why is PXP worth watching?

[1] PXP is currently on its all time uptrend support.

[2] PXP is currently on its 32-day SMA.

[3] From P10, PXP is currently on 61.8% Fibonacci.

Philex Petroleum Corp.'s 2011 net income totaled P537.5M. It's earnings included P271.4M from Forum Energy PLC, a 64.45% owned subsidiary, and a non-recurring gain of P443.7M from the restatement of the company's investment in Pitkin Petroleum Plc. when Philex Petroleum's holdings in Pitkin was diluted from 21% to 18.46%.

PXP's highlights last year included the completion of the first exploration sub-phase of SC72 by Forum Energy and the start of commercial production from the Brixton Energy coal project in Zamboanga Sibugay.

In 2012, Philex Petroleum Corp. is looking forward to the following:

[1] Commerciality of the hydrocarbons within the SC72 contract area;

[2] Develop a sustainable revenue stream from our coal business;

[3] Pursue new opportunities including a participation in the upcoming Philippine Energy Contracting Round