Busy as a bee
5:30 pm Tuesday 17 November 2009 Philippine Stock Exchange Index 3032.09 (+0.69%)
I mentioned yesterday that EEI was hovering just below its resistance of 2.50. It closed today at the high as 2.65 with total volume of 11.495 million shares. While I am not a purist on technical trading, I follow the market logic that when demand for a stock rises, price should follow. What strengthens my conviction on the stock is the knowledge that it is trading merely 5.4X its historical earnings. With a multi-billion dollar contract in a natural gas project in Papua New Guinea should only bring earnings much higher.
Another stock that I had recently mentioned was PNB which recently reported 134% increase in 9 months earnings. There was a spike in volume on November 13. Now the stock is trading just below its resistance of 25. My fearless forecast is that we will break the resistance soon as investors gather more confidence that earnings in 2010 will remain robust. I think the only hindrance to the merger with Allied is about to be removed; meaning they are probably close to selling Allied’s holdings in a U.S. incorporated bank. This is one trade that is really worth a shot. It’s like shooting fish in a barrel.
One of our readers became concerned about SPH’s disclosure that the board of directors had approved the sale of 30 million treasury shares. These guys no longer have milk on their cheeks. They won’t go out making such a disclosure without anything up their sleeve. My intuition tells me that a major share placement is in the offing. I’ll probably have the details in a few days. In the meantime, I’ll just keep my shares after all SPH pays good dividends.
I’d like to remind readers also to keep an eye on MBT which had been re-rated upward by a couple of foreign brokers. My strategy is to buy MBT on weakness with a view of keeping it in my core portfolio. For your information, the stocks in my core are AC, MWC, AP, TEL and MBT. I am also considering adding DMC and GMA7/GMAP in the protfolio.
For the chupiteros out there, I think a play is going on for CMT. The good thing about it is that CMT is actually seeing significantly higher earnings so it can also be a longer term play. The only downside is the stock’s intermittent liquidity which should be manageable anyway for trading lots of up to 100,000 shares.
MER and MPI made it today to both the most active list and the day’s top gainers. More and more these two stocks will move in correlation to each other. I reiterate my view that both these stocks would trade in a range. The independent variable would be the price of MER while the dependent variable would be that of MPI. The effective range as far as I perceive it for MER is between 190 to 220. For MPI, when MER trades close to 220 or even higher, MPI will trade to around 3.00; but when MER trades to the lower end of the range MPI will likely drop to 2.50. Such a correlation makes both stocks interesting to trade due to possible arbitrage trades on both.
On the whole, the market opened strong once more taking its cue from a strong Wall Street overnight. Again, PX pulled the plug by resuming what hopefully is not a prcipitous decline. TEL and GLO moved in sympathy as the index gave back all of the earlier gains. However, MER and MPI was telling a differnet story while MBT, AC, ALI, RLC and URC were holding on to their gains. Even FLI, MEG and AGI were showing a credible recovery. With the market closing generally higher, I reckon most people are pleased with their involvement in the market. With other plays ranging from possible M&A to block share placements going on, it merely reinforces the view that if activity is a buzz, there are profitable opportunities to be found.
As I write, I observe that Asian equities markets are down except for Jakarta, Shanghai and Manila. Even the European markets are mostly opening soft. I guess we can expect more mixed sentiment in stocks in weeks to come, but that is where the excitement in the market comes from. If all of us shared the same thoughts, we won’t have a market to speak of.
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