Petron Corporation or PCOR in the Philippine Stock Exchange was one of top stories of 2010 when it rose by more 100% in a little over 5 weeks. San Miguel Corporation (SMC) raised its stake in the company to 68% by buying 24 million shares of SEA refinery Corporation, which owns 50.1% of Petron. As you can see, the shares of PCOR had jumped from PHP 7.11 on November 23 to a high of PHP 19.98 on January 4, 2011. PCOR, however, has lost its momentum after reaching the said high and has since slipped to a low of PHP 15.50. Now, are we seeing the end of this nice rally? Or will PCOR be able to rebound following its recent streak of trading in red?
Presently, PCOR is trading at around PHP 15.50 which coincidentally is where the 50% Fibonacci retracement line of the recent upward wave. Notice also that the red moving average is at bay which I think would act as a support to keep it from falling further. If it does rebound from the said support, it could once again aim for its previous high at PHP 19.98. On the flip side, a fall below the red moving average, however, could send it down back to as low as the resistance of the former pennant.
Oh by the way, I remember that SMC’s and PCOR’s President and CEO Ramon Ang publicly stated the former’s intention to buy up to 90% of the of the latter. Any indication of such could once again cause a jump in PCOR shares. In the mean time, PCOR’s plan to spend PHP 1 billion this year to expand its retail business would in the same way increase its source of future cash inflow. Moreover, the increasing price of crude oil, assuming that the company was able to hedge some inventory at lower prices, would be later reflected in its bottom line.