Energy Development Corporation (EDC) Bulls Ready To Be Awaken

Energy Development Corporation or EDC in the Philippine Stock Exchange has been consolidating sideways for 5 months now after a good run up since 2009. Fortunately, it could be set for another move higher as it appeared to have formed what looks like a symmetrical triangle during the consolidation process. A break above the triangle’s resistance is all we need to confirm the chart pattern. Actually, this could already have broken out today but its 2.4% gain and buying pressure wasn’t strong enough. The stock price opened at PHP5.92, went all the way up to PHP6.15 as it tested the resistance and went down to close at PHP6.08.

In any case the bulls awaken and the EDC stocks break out from the symmetrical triangle, a race towards my target price of PHP7.10 is very reachable. That’s more than 16% profit from its current price, not bad eh! However, before it reaches that level, it first needs to surpass the PHP6.55 all-time high where there could be some heavy selling pressure. On the downside, its significant support is the 2-year uptrend. If it further drops below that area, the next marker could be triangle’s support.

Personally, I’m bullish with this chart pattern given the fact that the 2-year uptrend is intact, the MACD moves above the 0 line and the stock price is above the 100 and 200 moving averages. I’m actually expecting a breakout soon. I may be wrong but I’ve seen many stocks rise upon breaking out from triangles like this. Still, it’s the best to always have a stop loss in hand in case the trade goes against you. A breakout could be a strategic entry with a stop loss placed below the triangle’s support if you’d ask me.

Comments

  1. Myra says

    Hi again. I thought a downward trending channel is the next step of a consolidation phase? If the price action will be reaching 6.55 the. RSI will be overbought. what I wanna see is a 3rd test on the support level. If will count your triangle according to elliot wave it will be 1-5 then must go down. I’M just concern that it is not a clear breakout.

  2. Aldrich Sevilla says

    Consolidations could result to a drop in prices or a move higher. Kindly see this helpful link (investopedia.com/terms/c/consolidation.asp).

    Regarding the triangle’s elliot wave count, the move up which started last Feb to present is the 5th wave and continuation patterns usually break on the 5th wave. If it doesn’t break on the 5th wave, a reversal could be likely.

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