Companhia Paranaense de Energia (ELP)

Company

"Companhia Paranaense de Energia (COPEL) is a power utility that has traditionally operated in the areas of power generation, transmission, and distribution within the State of Paraná, in southern Brazil. With the implementation of a new institutional framework for the Brazilian power sector, the Company started to diversify its operations; it currently runs a telecommunications business, in addition to holding interests in other companies operating in such areas as power generation and power marketing, piped gas, sanitation, fixed and mobile telephone services, internet service providers, power and infrastructure projects, research and development, power and project management, and agribusiness. COPEL also makes its expertise available to both domestic and international markets: it has provided consulting services to countries such as Argentina, Chile, China, Colombia, Malaysia, and Paraguay." (company website)

Buy

18-Aug-06. After reaching a second peak in May, ELP pulled back sharply, but is now on the way up again. The 50-day moving average has turned up again after kissing the 200-day average.

Price momentum (PPO) — strong, stable, and positive
Trend (ADX) — strengthening, almost at the threshhold (20)
Money flow (CMF) — flowing into the company, although that is tapering off
Relative strength (RSI) — positive, although nothing spectacular
Volume — average volume has declined, but the recent higher-volume days have been up-days

Sell

Bottom line
7%

18-Oct-06. When ELP hit the new 52-week high of $12.24, that brought the activation price of the trailing stop to $11.36. The stop-loss order was triggered today.

When ELP set the new high, it became pretty clear that it was going to pull back; it was up more than 23% in just two weeks. It is now over-sold, and I would expect ELP to reverse and start another short-term uptrend soon. If it still looks strong, I can buy back in, although it will be at a higher price.

I like the use of the trailing stops. It would have been easy to say to myself, "ELP is sure to go back up again by next week." The truth is, however, it might not have, and a 7% profit is always better than a smaller profit or none at all.