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.

BEL: Double Bottom?

The chart below shows that BEL (Belle Corporation) is in a potential double bottom. BEL was one of the many companies that surged late in 2010 as it went up from a little below P2.50 last November of 2010 to as high as P6.30 in mid January of 2011 before starting to sink to less than P5 in February.

However as shown in the chart, BEL gained some momentum at around P4.70ish, went back up to reach near P5.20 before going back down to around P4.70. Since then, BEL gradually picked up some uptrend momentum.

What's interesting in the chart is that the P4.70 level was an uptrend resistance before the double bottom (hopefully) formed. Around January 6, 2011, BEL hit the P4.70 level before bouncing back up for one more run before losing some strength.

Should the double bottom hold, BEL could continue its uptrend run. The good catch? BEL is just hovering around the P5 mark, quite cheap.

I'm optimistic about BEL (I'm always optimistic anyway) but a confirmation would be wise. The double bottom might not hold true. Better be safe than sorry.

MER: Shining Bright

The chart below shows that MER (Meralco) is getting near it's 2-year uptrend support at around the 213-220 range. For the month of February, MER found a strong support at around the 216-220 range but always manages to finish a higher high from 235 to around 240 and its resistance forming a slope signaling an uptrend.

If worse comes to worse and the technicals won't hold true, MER could fall back down to its 5-year uptrend support at around 160.

Fundamentally, MER is a good long term buy. MER has significantly developed under the leadership of Manny Pangilinan in energy production, distribution, and customer care. MER is looking forward for further and massive developments in energy production and distribution in the next 5 years.

To start off, MER is going to put up a pioneering jet fuel/diesel/natural gas plant in Calamba, Laguna set to start on the first quarter of 2012 to produce 120-150 megawatts of power. The company also aims to produce 150 megawatts in 2012, another 150 megawatts in 2013, 600 megawatts in 2014, and 300 megawatts in both 2015 and 2016. MER is also in talks with 2 to 4 groups for possible partnerships in the future and is optimistic that they can offer consumers 5 kilowatt per hour rates.

MER is dancing around the 230 levels right now which for me is a good buy. As soon as their plans will start to come into fruition, MER could go as high as 450 in the next 1 1/2 years based on Fibonacci.

SCC: Going Down?

For a little more than a year, SCC's uptrend support has been so strong. SCC's stock rose from around P40 in January of 2010 to as high as P210 (even higher) in January of 2011. The support was challenged several times yet held firm.

However the chart below signifies that SCC's uptrend support might finally give in. First, the chart shows a rising wedge formation which theoretically signals that a downtrend is coming soon. Second, SCC has breached its seemingly strong uptrend support (encircled in blue).

Though SCC is a strong one, the chart shows the market sentiment. It's price action is starting to consolidate after a gradual yet consistent rise. This could be testing a new support level or heading for a reversal (hopefully, it's the former).

On a personal note, I think that SCC is going to be one of the strong stocks as soon as PHISIX is done with consolidation and resumes an uptrend. The Mining and Oil index is projected to do very good in 2011 and SCC is the leading company in the said index.

SCC's charts shows two things: [1] That it is a very strong stock considering its uptrend support (which was breached possibly because of consolidation of the market), and [2] That it might finally break the support and go for a nosedive. How deep? Nobody knows. SCC could go as low as P160, P140, or P110 based on Fibonacci's 38.2%, 50%, and 61.8%.

A bold prediction on SCC: As soon as this gets through the previous uptrend support which is at around the P210-P215 range, it will gain momentum and rise fast. Right now, I think that it would just be wise to buy on rallies and sell on dips (or sell on resistance).

DMC: Feels Really Good to be Home

This is the right time to do some stocks window shopping. The market is in the consolidation state for almost the whole first quarter and a correction is just waiting around the corner. While looking around for some potentially good stocks, I have stumbled upon DMC.

The chart below shows that DMC is getting near it's two year uptrend support at around 30ish. If the support holds, DMC is bound for another strong uptrend. In approximately 2 years time, DMC rose from barely a peso to as high as P35 or 3500%. Should such slope and momentum continue, DMC could go as high as P50 or even P55.

The chart below shows where DMC stands in the Elliott Wave Theory. Though not as steep as it should be, I think that DMC is already at wave 4 and wave 5 is coming up soon. DMC is also at its 23.6% Fibonacci support level. Though 23.6% doesn't hold strong in comparison to 38.2%, 50%, and 61.8%, it is still a valid support. Considering that DMC is in consolidation and it's short support holding quite well, I think that makes 23.6% valid.

Fundamental wise, DMC has just bagged in 3 contracts for 2011 worth billions. This news actually prompted me to give DMC a look.

I still don't think that DMC's fundamentals is that strong to push it back up. However DMC is really looking good technically and just like most of the stocks that I'm looking at, a few more fundamentals are needed to trigger an uptrend.

Megawide: Developing Properties, Developing Potential

Megawide Construction Corp. is the first company to go public this 2011. Just in case you're not familiar with what this company is, Megawide is one of the biggest and fastest growing engineering and construction firms in the Philippines today. Megawide accounts for 70% of the residential condominium projects of the Sy family's SMDC. Other than SM's projects, Megawide's clients include Belle Corporation, Antel Group, Suyen Corp. (owner of Bench), Prince Jun Development Group, Bellevue Hotel Group, Keppelland Realty, Malate Bayview Development Group, and Goldland Properties and Dynamic Realty.

In it's move to go public, Megawide opened 34% of its company's total stock to the public. In it's opening day, Megawide (listed as MWIDE in PSE) offered P7.84 per share.

Being it's top client, Henry Sy's SM bought 64% of MWIDE's total shares leaving only 36% left for public consumption. SM is having several construction plans for 2011 all over the Philippines which means more projects for Megawide. Never mind Sy and SM owning part of Megawide to cut costs in their projects, Megawide is going to have a very busy year and that's all that matters.

Rumors also has it that SMC plans to buy into MWIDE. SMC's diversification plans fits well with MWIDE as SMC is planning to get into PPP (public private partnerships) this year. Should SMC get into MWIDE sooner or later, that would further boost MWIDE up. SMDC and SMC are strong enough to lift MWIDE up. Aside from SMC, Phinma and Ben Chan of Bench are also rumored to take part of MWIDE.

Lastly, there are 11 PPP reported to start this year for a rough total of $200 billion. Being one of the biggest construction and engineering firms, expect Megawide to get into the negotiation and contract talks in at least one of these 11 projects.

Megawide was established in 1997 by De La Salle University civil engineers Michael Cosiquien and Edgar Saavedra and became a P2 billion company since then and accounts for 20% of high rise residential property construction business. Turnover is expected to double to P4 billion this year.

My personal note is that I think that MWIDE is still undervalued considering that SM bought more than half of it's shares. If SMC would push through in acquiring shares and with their PPP plans, MWIDE could be worth a lot more than its IPO price.

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.