Technical Side: Doji

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What is a Doji?

Doji is a candle formation which occurs when the opening and closing price of the stock is the same or nearly the same. See examples below

Why is the Doji an important candle formation?

Doji are important because they are indicator of market indecision. Buyers and Sellers end up at the same price after trading. With this concept Doji becomes a turning point in the stock's trend. 

The usual assumption is that when a Doji is formed at the bottom of the stock meaning when the stocks trend is downward and a Doji is formed at the end it could mean a reversal which in this case is an upward. A Doji at the top or peak of the trend might also indicate a reversal but this time it is a downward trend.

source:http://stocata.org/

source: http://stocata.org/

A doji with long wick or shadows and the opening and closing is in the middle is also called Rickshaw man. 

http://www.forexbrace.com

This is the doji that clearly signify indecision. Trading range is wide as indicated by the long wick or tail. The stock opened at the middle and close at the middle meaning neither buyer or seller is willing to advance or lower price thus ending in the same price. 

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Gravestone doji as it says is the bearish doji. This doji signify that  sellers who wanted to sell their holdings tried to trade at a high thus forming a long wick but in the end price is pulled down by buyers but never below the opening price.

A dragonfly doji is the reverse of the gravestone. The scenario is that buyers drove the price down but sellers fought back thus push back the price up but only up to the extent of the opening. 

With these general doji types one should also make sure that such formation must be confirmed by either the previous candles and volume. As I mentioned the general assumption is that a doji found at the bottom indicates an upward reversal while if found at top a downward reversal. Also doji form patterns with other candles. These combination of candle formations make a pattern and may indicate a bullish or bearish trend.

My Personal Analysis: East Asia Power Resources Corporation(PWR)

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source: http://www.pse.com.ph

East Asia Power Resources Corp or PWR in the Philippine Stock Exchange has recently made noise with its sudden jump in price right after the take over of Century Properties.

Here is a detailed news regarding the take over of PWR by Century Properties as a backdoor listing of the said company to the Philippine Stock Exchange:

Century Properties takes over East Asia Power firm

By: Doris C. DumlaoPhilippine Daily Inquirer 7:14 pm | Monday, July 11th, 2011 

MANILA, Philippines—High-rise property developer Century Properties Inc. has sealed a deal to take over 93.59 percent of dormant energy company East Asia Power Resources Corp. for P127.4 million.

In a disclosure to the Philippine Stock Exchange on Monday, East Asia said two deeds of assignment of stock had been signed to finally close the transaction resulting in Century’s acquisition of direct and indirect shares in the company.

Century Properties entered into the deal with a private shareholder, El Paso Philippines Energy Co. Inc., paving the way for its acquisition of 91.69 percent indirect stake and 1.88 percent direct stake in East Asia.

The deeds of assignment were required by the Bureau of Revenue for the “purpose of facilitating the payment of the tax implications and the release of certificate authorizing registration for both transactions,” the disclosure said.

Century Properties has committed to make a tender offer to other minority shares for P0.04 apiece, higher than the P0.038 per share purchase price for the 93.8 percent stake. The tender offer will cost the property group up to P9.12 million. (To read more please go to http://business.inquirer.net)

The company is a power generating company through its 3 Navotas barges but was shut down due to their inability to generate enough income to cover its operating cost. The sudden entry of Century Properties have given hope to investors that might lead to PWR's return to operation and also might be a window for other business ventures besides power generation.


Fundamentally speaking PWR is not a good stock pick. With a Current Ratio of 0.04 and a Debt to Equity Ratio of -1.17(due to a deficit about 8 billion as per March 2011 report) the PWR itself is illiquid and buried in debt. The main cause of such was due to the high cost of bunker oil the main resource from which the company generates electricity and the low price of the electricity.


The entry of Century Properties caught the attention of the investing public with the intention of the said company to offer minority shareholders so that it can wholly owned PWR.


The continuing rise of PWR's price already reached an overbought level but still I have no idea where will it lead to. Check the graphs below:

The price of PWR is being set to reach up to 3 or 5 pesos per share. Some speculate that with the backdoor being planned by Century Properties it might merged thus like what happened to other companies which underwent the same scenario its price will be go up once finalized thus investors kept on buying making the price continuously climbing.


The question now is can we still ride the price uptrend? I guess if you were able to get a hold of it last week at 1.50 level better take the profit this coming Monday or any day of the coming week if the price starts to go down. As of last Friday the stock price jumped from 1.95 to 2.62 which is a whopping 34% increase over a day. Always remember that a stock price with such price trend will experience the same drop at a fast rate that is why it is advised to be careful. When you feel that it starts to pullback better sell before you end up losing. On the other hand as everyone is hoping that it would continue to go up and break out. If that happens all I can say is congratulations to those who got hold of it while it is still at 1.50 level.

Some lessons learn during this Philippine Election

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You might wonder why I am writing about the recent 2010 Philippine Election in a blog about stock investing. If you haven't done so check PSE's website for today's(May 13, 2010) uptrend performance here.

If you haven't noticed the Philippine Stock Exchange performance last Tuesday right after the peaceful election, the PSE rose 4% on that day and mind you it is the only bourse or stock market that posted positive in the Asian market. So what is the lesson to be learn here?

One must be aware of the trend. Trend is something that any stock broker or trader should know. Any news either global or local can affect the Philippine Stock Market. For the past two weeks most market were sluggish due to the Greece debt crisis and the Goldman Sach's issue. The PSE as well went with it but this week nearly all market was down except for the Philippines due to the positive results of the 2010 election. I guess investor confidence on Noynoy is good. The stock market was rallying and has posted positive for the 3 days. Even CNBC's Worldwide Exchange TV show  had a interview of a stock analyst from the Philippines saying Noynoys lead has attracted investors due to the confidence they had with him.

Trend means the forecasted eventuality. Thus upon having the election result most stocks went beyond stock analyst target price. So always look for the trend and analyze it carefully. The trend might be tricky sometimes does one has to read and compare so that wise investing decisions can be made.