Contents:
- Introduction
- Technical Analysis: Price and Trend Overview
- Volume Analysis: Institutional Interest or Just Noise?
- Breakout Trading Strategy: What Really Matters?
- Trading Recommendations Based on the Hybrid 10-Step Strategy
- Final Thoughts
Introduction
Manila Electric Company (MER) closed at 488.60 on February 6, 2025, gaining +3.60 (+0.74%) for the day. While MER has been consolidating within the 460–500 range since December 2024, a recent increase in volume raises questions about whether a breakout is forming. This review will assess MER’s price action, volume trends, and breakout potential using our Hybrid 10-Step Trading Strategy.
MER Daily Chart Analysis – February 6, 2025
Technical Analysis: Price and Trend Overview
1. Current Price Action
- MER closed at 488.60, up +0.74% for the day.
- The short-term trend (20-MA at 481.15) is acting as immediate support.
- The long-term trend (200-MA at 426.54) remains significantly lower, confirming a strong uptrend in the bigger picture.
2. Key Resistance and Consolidation
- MER has been ranging between 460–500 since December 2024.
- 500 remains the key breakout level, while 475–480 serves as near-term support.
- Despite a recent rebound from lows, the price remains within the consolidation zone, meaning no confirmed breakout has occurred yet.
Volume Analysis: Institutional Interest or Just Noise?
Recent Volume Comparison
- Closing Volume on February 6, 2025: 0.32M
- 65-Day Volume Average (+20%) as of February 5, 2025: 0.27M
- 30-Day Volume Average (+20%) as of February 5, 2025: 0.26M
The 0.32M volume is above historical averages, suggesting increased trading activity. However, higher volume alone does not confirm a breakout—price action must also validate the move.
Breakout Trading Strategy: What Really Matters?
A breakout strategy prioritizes price first, with volume acting as confirmation. Here’s how to analyze MER’s current setup:
Breakout Occurs Only When Price Clears 500
- Price must decisively break above 500 to confirm a bullish breakout.
- Until then, MER is still inside the 460–500 consolidation range.
Volume Confirms the Move
- Ideal breakout volume should exceed 0.40M, significantly higher than today’s 0.32M.
- If volume is low during a price breakout, it could be a false breakout, meaning the price could quickly reverse back inside the range.
No Entry if Price is Not in the Sweet Spot
- Even with higher volume, if the price is still below 500, the breakout is not valid.
- Decision: WAIT for the price to break above 500 before considering an entry.
Trading Recommendations Based on the Hybrid 10-Step Strategy
🔹 Short-Term Traders (Swing & Momentum)
- Wait for a confirmed breakout above 500 before entering.
- If MER tests 490–500 with volume exceeding 0.35M, a breakout is more likely.
- Support at 480–475 should hold; a breakdown below 475 could signal weakness.
- Stop-loss at 475 for any short-term buy trades.
🔹 Long-Term Investors
- MER is above both the 20-MA and 200-MA, confirming a long-term uptrend.
- Best accumulation zone: 460–470, where price has found support multiple times.
- Holding is recommended unless the stock breaks below 450, which could indicate a deeper correction.
🔹 Existing Holders
- No immediate exit needed, but if volume weakens and MER fails to break 500, expect continued consolidation.
- Consider partial profit-taking at 500–510, as this level has acted as resistance.
- Use a trailing stop at 475–470 to protect gains.
Final Thoughts
MER is currently in a consolidation phase between 460 and 500, with a potential breakout forming. The increase in volume is encouraging, but price confirmation is still required before entering new positions.
🚨 Final Takeaway: Wait for MER to break 500 with volume exceeding 0.40M before confirming a breakout. No entry until price is in the sweet spot! 🚀
NOTES ON OUR BREAKOUT TRADING STRATEGY
How We Arrived at the 0.40M Volume Recommendation for MER’s Breakout Confirmation
The 0.40M volume threshold for confirming a breakout above 500.00 in MER was determined based on historical volume trends, breakout theory, and institutional activity requirements. Below is a breakdown of how we arrived at this figure.
1. Historical Volume Analysis
Volume Data as of February 6, 2025:
- Closing Volume: 0.32M
- 65-Day Volume Average (+20%): 0.27M
- 30-Day Volume Average (+20%): 0.26M
💡 Interpretation:
- The 0.32M volume on February 6, 2025, was above both the 30-day and 65-day volume averages, indicating increased trading activity.
- However, it was not enough to push the price beyond the 500 resistance level, meaning more volume is needed for a confirmed breakout.
2. Breakout Volume Rule of Thumb
A valid breakout should have at least 1.5x to 2x the stock’s average volume, ensuring that the price movement is backed by strong institutional participation and not just retail trading.
🔹 Applying This to MER:
- 65-Day Adjusted Average Volume: 0.27M
- Target Volume for Breakout Confirmation:
- 1.5x of 0.27M → 0.40M
- 2.0x of 0.27M → 0.54M
Since MER is consolidating within 460–500 and has attempted to break out multiple times without success, the minimum volume threshold for a breakout should be 1.5x the adjusted 65-day average, which equates to 0.40M.
3. Institutional Accumulation Requirement
- For large-cap stocks like MER, institutions (fund managers, investment firms, and big traders) tend to build positions gradually.
- A sustained volume surge above 0.40M would indicate strong institutional interest, reinforcing that the breakout is not a false move.
4. Previous Failed Breakout Attempts
- If past breakout attempts at 500 occurred with volume lower than 0.40M and failed, it confirms that higher volume is needed to sustain a move above 500.
- MER’s previous range-bound trading suggests that resistance remains strong, requiring significantly higher participation to break through.
Conclusion: Why 0.40M is the Key Breakout Volume Threshold
- It is 1.5x the 65-day volume average, aligning with breakout theory.
- It is higher than previous failed breakout volumes, indicating institutional confirmation.
- It ensures MER’s breakout above 500 is sustainable, avoiding false breakouts.
🚨 Final Takeaway: A breakout above 500 will require volume exceeding 0.40M to be considered valid. If volume remains below this level, the breakout is at risk of failing. 🚀
Disclaimer: This post is for informational purposes only and should not be considered financial advice. Always do your own research before making any trading decisions.
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