The A shares of Felipe Yap’s Lepanto Consolidated Mining Company finally saw a sharp correction after marking a new all-time high just above Php 1.80. With gold now back on the northern track, will LC follow suit?
A combination of LC’s removal from the Philippine Composite Index (PCOMP) and a dip in the price of gold hurt both the A and B shares of Lepanto during the last several trading days. Index tracker funds like BPI’s Philippine Stock Index Fund (PSIF) and the like are of course forced to dump Lepanto and replace them with those issues that are added. Having said that, the sell-off in LC seems to be coming into an end at least from a technical point of view.
As you can see from its chart above, LC has corrected to the 50% Fibonacci retracement level of its recent up wave. This level should give LC some support and lift. Notice also that a doji candle appears right when it hit the 50% Fibonacci line. A doji candle for technical analyst represents a neutral battle between between the bulls and the bears and being seen at the bottom of a correction suggests a possible takeover by the bulls in the near term. Moreover, a presence of a ‘hidden bullish divergence’ where the price makes higher lows and the RSI registers lower lows during the same period indicates a likely pick up in prices. In any case, a fall below Php 1.40 could send LC down to Php 1.20. A bounce off of it, on the flip side, could send it back to its former high or even higher.