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.