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.