(This analysis is for October 12 - 16, 2009)
BUSINESS PROFILE
Pacific Online Systems Corporation (LOTO) was incorporated on November 11, 1993. LOTO is engaged in the development, design and management of online computer systems, terminals and software for the Philippine gaming industry. It brokers technology from global suppliers of integrated gaming systems and leases to PCSO the equipment needed for its online lottery operations in the VisMin regions. LOTO also provides PCSO the necessary technical support.
In addition to its core gaming operations, LOTO also has an investment in Innovative Solutions Consultancy Group (Synergy), a joint stock company incorporated to manage enterprises engaged in the gaming business. Synergy's subsidiary is Total Gaming Technologies, Inc., a domestic firm founded to develop new games for the Philippine gaming industry and to provide consultancy service and equipment to the local gaming operators.
On August 29, 2007, LOTO, through its subsidiary Loto Pacific Leisure Corporation, acquired Lucky Circle Corporation, a company engaging in retail sales for PCSO products, principally operating at SM malls nationwide.
As of December 31, 2008, LOTO had already deployed 1,600 on-line terminals around the VisMin territory. LOTO's total terminal deployment also covered 67 cities and 461 municipalities.
Source: SEC Form 17-A (2008)
Analysis:
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LOTO has closed above its short time moving average.
Short time moving average is currently above mid-time, and above long time moving averages. The relationship between price and moving averages is: bullish in short-term, and bullish in mid-long term.
LOTO has closed below upper band by 37.9%.
Bollinger Bands are 158.8% wider than normal.
The large width of the bands suggest high volatility as compared to LOTO's normal range. Therefore, the probability of volatility decreasing and prices entering (or remaining in) a trading range has increased for the near-term. The bands have been in this wide range for 19 days.The probability of prices consolidating into a less volatile trading range increases the longer the bands remain in this wide range.
LOTO is currently still trending up with a trend strength of 67.05. Its average daily range is 0.65.
LOTO's volume last Friday is 175,300, which is below its average volume of 408,340 for the past 10 days.
50 Day Historical Volatility (preferably greater than 40%): 74%
6/100 Historical Volatility (preferably less than 50%): 65%
Support / Resistance:
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LOTO's current correction is -33% of the Fibonacci retracement. Its nearest Fibonacci support line is at 16.28 while its nearest resistance line is at 18.
For the S/R its nearest support line is at 16.25 and its nearest resistance line is at 18.
Base from the weekly pivot point analysis of LOTO:
Main pivot point for the week is 17.08.
This are the primary support lines of LOTO this week: 16.17, 15.33, and 14.42
While its primary resistance lines for this week are: 17.92, 18.83, and 19.67
Base from this we can conclude the there is a strong support line around 16.265. I'm expecting LOTO to test this support line. If this will hold then LOTO will consolidate a few more days on this line before continuing else it will try to find its next support line between 16.17 and 15.33. Take note also that between this two pivot points the Fibonacci 50% retracement support line exist.
Buy / Sell:
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LOTO's momentum is still bullish but its started to show weakness already. Confirming that this stock is entering consolidation.
RSI reading is 59.06.The last signal was a sell 3 days ago. The RSI has set a new 20-day low while the security price has not. This is a bearish divergence.
Fast stochastic %K reading is 45.50. Confirming the RSI that LOTO is neither overbought or oversold. But take note that actual weight between being overbought and oversold in not reliable due to that fact the this stock is strongly trending upward.
Currently the MACD is bearish since it is trading below its signal line. Last signal was a sell 2 days ago.
Recommendation: BUY on strong pullback.
Look for possible entries near 16.265. If support line won't hold then wait for opportunity to enter between 16.17 and 15.33. Look for confirmation signals. You can use the MACD signal line crossover or even a higher high or a higher low candlestick pattern for a low risk entry.
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