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EEI Corporation – Great Fundamentals But Not Its Technicals

EEI Corporation or EEI as listed in the Philippine Stock Exchange is in the construction industry involved in building power generating and transmission facilities, oil refineries, chemical and cement plants, food and beverage manufacturing facilities and semiconductor assembly plants. They also build high rise landmarks as well as government roads, rails and bridges. EEI Corporation, along with foreign join venture Al Rushaid Construction Co. Ltd., recently got a $200-million subcontract deal with Saudi Aramco Mobil Refinery Co.’s  clean fuels project in Saudi Arabia which is expected to start on 2013.

On the technical side, the EEI stocks since the start of 2009 rose sixfold from PHP 0.78 to a 2-year high of PHP 4.70 last September which at the same is the ascending channel‘s resistance. The resistance showed heavy selling pressure and from there on, the stocks started to decline. EEI then broke down from the ascending channel’s support and tried to head back up but failed. The attempt rise just completed the right shoulder of the head and shoulders pattern in the daily chart. In the near term, the stocks look bearish as it broke down from the neckline of the said pattern last Friday. The same happened to Megaworld (MEG), if you wish to see it, kindly check my post. Gauging the size of the head and shoulders and added to the breakdown point, we’ll get a target price of PHP 3.00 which is both a technical and psychological support so heaving buying pressure will most likely take place here. However, before it reaches that marker, the PHP 3.60 and PHP 3.20 support levels need to be broken. The MACD is moving below 0 and the 50-period moving average has crossed below the 100-period moving average which signals weakness. On the brighter side, EEI is still overall on an uptrend if it rebounds in the given supports and the current decline could only be in the near term. The immediate hurdle that EEI needs to surpass to regain its upward momentum is the 4-month resistance. A successful surge above it could prompt the stocks to ascend toward the next resistance at PHP 4.09.

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