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.