The Rainbow After The Rain

After some selling pressure for more than a month, the Philippine Stock Exchange Index (PHISIX or PSEi) is now into the consolidation stage giving signs of a possible uptrend real soon. Some stocks have already broke loose from their short term (in the 1 month downtrend) resistance, some going into consolidation as well while some turned such resistance into supports. However, there are some that continued to go down.

Since the valuations went down for the past weeks, this is a very good time to buy as the much anticipated uptrend is just around the corner. PHISIX is flirting with it's 3900 resistance and as soon as it gains some serious bullish momentum and break such resistance, expect a good number of stocks and PHISIX as well to soar high.

The list entails a lot of Fibonacci retracements and Elliott Wave Theory wave 5 potentials. Elliott Wave Theory's wave 5 is an uptrend or in other words, the value of a particular stock continuing to go up. Fibonacci on the other hand notes some precalculated support/resistance levels that are found to hold true (not all the time but most of the time). If a price hits a Fibonacci support/resistance, it is most likely to reverse.

I have kept a handful of companies in my watch list and picked a few with some really good potential to invest in for at least this year. Most of the MACDs and RSI of such companies are positive indicating some good points of entry. Here's my list:

AC - For the past weeks, AC dropped from around 403 to just a little over 320. For the month of March, AC gained buying pressure as it rose to almost 355. In a two-year reference, AC is hovering above it's two year support and might possibly head into wave 5 of Elliott Wave Theory. My favorite part is seeing it bounce at 38.2% of Fibonacci since January of 2009.

AP - From mid-October of 2008 until this day, AP is on a very strong uptrend gradually yet consistently rising from barely a peso to as high as 35. However, a certain support (from around September of 2009) says that AP's support has turned into a resistance which it is currently challenging right now. Fibonacci suggests that AP might have bounced at 23.6% already (which is a minor support in Fibonacci). As of now, there is no clear indication as to where AP would head next but as soon as it breaks through its resistance at around 32, it's going to be a good buy.

DMC - Technicals are really looking so good for DMC. First, it is resting on a very solid uptrend support and just bounced recently at around 33-34. Second, in a two year span, DMC's position for an Elliott Wave Theory wave 5 is looking really good. For the entry, DMC just broke it's resistance at around 37. It is going to be on its way to challenge its previous high at 40. I'm very optimistic about this one.

JGS - JGS broke its uptrend support and went sideways for the past 2 1/2 months. However, JGS is forming an ascending triangle and should the resistance at around 19.8 will be broken, JGS could go high fast. In a 1 1/2 years span, JGS could enter Elliott Wave Theory wave 5. It needs some confirmation though as MACD is showing selling might just be ahead. JGS has already hit its 38.2% Fibonacci support in a two year reference.

MBT - Another Elliott Wave Theory wave 5 candidate. However, MBT's support for the last 2 years has become its resistance. If it could break its resistance at 72, it will be on its way up, wave 5 might come after all. It is also resting on its 38.2% Fibonacci support. A bounce is more likely.

MEG - From April 2009, MEG is an eye candy for Fibonacci players. MEG is well resting on its 38.2% support, consolidated, and resumed an uptrend. MEG also just bounced from its 2 year uptrend support, quite a solid support that is.

RCB - In nearly two years, RCB just bounced from its 23.6% Fibonacci support. However, on the same span of time, it has just gone below its uptrend support and challenges to break through it. Should RCB break such resistance and turn it back into a support, it will be on its way up.

SCC - Not really much to say about this one. It's uptrend support is very strong. One of my best picks for the year.

SMC - After a strong uptrend, SMC is consolidating as of the moment. Considering all the fundamentals that this company has, SMC remains a strong one for 2011. Confirmation is needed for entry. From the foot of its uptrend late in 2010, SMC is on the 23.6% support of Fibonacci at roughly P160.

SMPH - As of this writing, SMPH just broke out from its downtrend from December of 2010. A support at 10 is somewhat found but as far as Fibonacci is concerned, it might fall down as it hits the 23.6% ceiling. However, in a two year span, SMPH might head into Elliott Wave Theory wave 5. Quite worth looking at.

However, these are all just based on my analysis of the charts and doesn't include fundamentals yet. Always keep in mind that the most important thing in all of these is the price action. Technicals are just signs of the possible behavior and to project the possibility of the direction of the price. If things won't go as expected, bail out. Your decisions will never be right all the time. And lastly, cut hoping (that the price will go up anytime soon). Hoping can lead to false hopes.

SMC: Fundamentally Sound in 2011

San Miguel Corporation (listed SMC) is one of the companies poised to have a breakout in 2011. SMC broke loose from around P80 in November of 2010 and reached highs at around P185 entering January 2011. The sudden rise was triggered by the reports that SMC is going to invest $40 million in Indophil Resources NL, owner of 37.5% stake in the untapped gold and copper deposit in Asia and part of the $52 billion Tampakan copper-gold project in South Cotabato and the recent acquisition of petroleum heavyweight Petron.

However, SMC has somewhat found a resistance at around P180 as shown in the chart below. For a company that has a lot of fundamentals, what could possibly be holding SMC back from breaking out? SMC's sharp rise might have prompted several firms and individuals to take their profits. The sell out has brought PHISIX down and several investors have taken their money to more stable economies such as the United States and Europe, invested them in stronger currencies or indices.

As far as SMC is concerned, their diversifying plans have further boosted the value of their stocks. Other than the Tampakan project, SMC may also challenge the Pangilinan-led Metro Pacific Investment Corp.'s offer to buy the government's stake in Metro Rail Transit (MRT 3) confirmed by SMC president Ramon S. Ang. SMC is also in talks with Citra Lamtoro Gong Persada and Star Tollway Corp. for a possible organization and establishment of a corporation that will consolidate and undertake toll-road operations and participate in infrastructure projects initiated by the government through it's PPP (public private partnerships) program.

In terms of revenues, SMC eyes a revenue of P1 trillion by 2016. The company made P230 billion in 2010 and projects P530 billion in revenues in 2011. Out of the projected P530 billion revenue, only P214 billion are said to come from the company's traditional food and beverage businesses while the remaining sum from the new businesses, spearheaded by Petron.

Mr. Ang also announced that SMC will have its second public offering once the price of its shares goes up to P250. Ang also said that SMC's current price which is around the P175-P185 range doesn't reflect the company's real assets and worth.

As soon as the market would pick up some buying momentum and break its resistance at P180, expect SMC to go high, fast, and steep. Personally, I think that SMC could go higher than P250 even as high as P300 before 2011 ends provided that its diversification plans would come into fruition.

Going Long for 2011? Consider these Stocks

There are some things that got me excited recently. Some companies are showing great potential and are giving excellent points of entry before another rally comes.

A number of the companies in my watchlist are showing signs of life as soon as PHISIX recovers. I've mixed up very raw data (weekly MACD) to the historical charts of several companies and picked a few that shows really great potential (with few biases because most of these are personal favorites). Here are some of the potentially big (I mean really big) winners for 2011.

SMPH (SM Prime Holdings): The chart below shows that SMPH is bound for it's fifth wave in reference to Elliott Wave Theory. The fifth wave is an uptrend and ideally it will go for about a year referring to the first two uptrend waves.

SMPH's MACD for the week was good improving from -0.176 to -0.081 from February 2 until February 7.

For those who are looking to go long with SMPH, there is a drawback in it's graph. Should SMPH fail to bounce from it's support at around 10.2-10.5, it might go all the way down to it's long term support pegged at 6.50. Quite a deep fall from where it is right now (10.98).

SMC (San Miguel Corporation): A personal favorite. SMC was resting on a not so steep uptrend support until it broke loose near end of 2010. The chart shows that SMC jumped from around 80 late October 2010 to more than 180 by January 3, 2011 or about 140% growth in a little more than a month.

Right now, it seems that SMC met a strong resistance at 180. However, it remained strong despite the weakening of PHISIX which signifies that a very strong rally is just awaiting on the corner. Personally, I think that what's keeping SMC from getting past 180 is PHISIX. Once PHISIX starts to go up, expect SMC to go as well.

Many people are hesitant on taking SMC because of it's price but for me SMC still has a long way to go. SMC has already announced for a 2PO at around 250, announced it's diversifying plans, and has an income more than many blue chip companies. 180 is actually cheap for SMC. I could say that we could never go wrong with SMC.

SMB (San Miguel Brewery): SMB's chart looks very promising. An ascending triangle from near end of November 2010 until February for 2011 before finally getting past 30. Right now, it seems that history might repeat itself. SMB have found another resistance at 33 but another ascending triangle is forming. 35 and 36 is definitely within reach and is a good one for swing traders.

Just like SMC, SMB skyrocketed late 2010 before resting around the 25-30 plateau. Should another SMC rally come, expect SMB to follow. The good catch? SMB is way cheaper than SMC.

MEG (Megawide Corporation): Just like SMPH, MEG is another wave 5 bound entity based on it's 2-year chart. MEG was way below a peso back in the first quarter of 2009 and now is roaming around the 2-3 peso range (banks, cooperatives, bonds, and mutual funds can't give you around 200% growth in less than 2 years).

If MEG will continue to follow Elliott Wave Theory, it could reach P4 before 2011 ends or maybe even around P4.50.

For the past week, MEG's MACD is getting better bouncing from -0.0812 in February 2 to -0.0716 in February 7. MEG's price action doesn't show a lot of optimism lately but as far as technicals are concerned, MEG is going to be a really good one as soon as PHISIX recovers.

Lastly, MEG has announced to sell 292 million more shares at about P7.84 per share. If MEG will hold on to it's fundamentals, we are seeing some 200-300% growth this year.

JGS (JG Summit): Speaking of growth, where else could you find a gain of nearly 2000% in just two years? JGS grew from barely a peso back in January of 2009 to roughly P20 in January of 2011. In fact, it went as high as P25 around October of 2010. Now that's some serious growth.

Right now, JGS is getting near it's uptrend support at around 18 or 17.50 the least. However, it would be wise to take PHISIX into consideration before riding the JGS wave.

JGS's MACD went up the past 4 trading days which signifies that it is strengthening once again. Price action might say otherwise but technicals never lie. Sooner or later JGS will rise again.

This is one serious stock to take into consideration for 2011 (along with SMC).

CEB (Cebu Pacific): Price action doesn't really look good for CEB but the chart says otherwise. CEB is forming an identical triangle which says that it could go either way. However, MACD is getting better and in fact, has signified a buy signal.

Since CEB's value are down, I think that it is going to be at bargain once PHISIX gets back up. Lance Gokongwei already announced that CEB will be adding more planes and CEB will be having more affordable flights in 2011. Good news for employment and passengers.

Though it really doesn't look that good right now (price action), CEB is something worth looking. Never take CEB for granted especially if JGS will rise back up.

The downside for CEB is that it doesn't come in cheap. More fundamentals are needed.

PHISIX heavily influences the direction of the prices as much as the price action directs where PHISIX would go. Be patient and at the same time be cautious. PHISIX will get bullish (go back up) sooner or later but the London based Barclays Capital projected that the Philippines inflation rate might reach 4.5% by mid year of 2011 which might make PHISIX continue to go down. BDO's forecast of PHISIX to go down to as low as 3600 might really come true.