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I know many of you have been wondering
whether HESG will be selling its product on QVC as previously
announced. The answer is yes- check yesterday's BLOG for details.
Also- there's a new BLOG with my thoughts on HDY which hit
the $3 level at the close on Friday. The stock is on a tear. Check
the BLOG for my thoughts.
To use the BLOG, simply go
to the home page at www.otcjournal.com
- the BLOG will scroll down automatically on the right side of your
screen. The most current journal entries appear in the middle of your screen.
Check back frequently for updates particularly when stocks are moving to
overbought or oversold levels or in volatile markets. Your questions and
postings do not automatically appear, so don't bother posting the same
question multiple times. I personally go through to moderate and respond
to every reasonable question.
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Trading The
Big, Streaky Moves |
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Big, streaky moves characterized
by a series of long bars on the chart, can make for exciting trading opportunities,
both on the buy and sell side. There have been some great recent examples
both the in small stocks featured by the OTC Journal, and in the
larger cap arena. First, let's look at the biggest streaky move in NASDAQ
history.
Here's the massive tech stock bubble.
The greatest bubble in history. The chart shows February, March, and April
of 2000- the infamous NASDAQ double top which marked the end of one of
the greatest 10 year periods for technology stocks, and the beginning of
one of the worst three year periods for tech- affectionately known as the
"TECH
WRECK".
This is a daily chart. Notice the
long, streaky bars as the NAS nears its top, and the long streaky bars
on the way down. The move from about 3800 to over 5000 was driven by short
sellers being blown out of their positions, causing the biggest short squeeze
in history. The shorts were right on their valuation call, but the stock
market mania decimated their equity.
As the NAS neared its top, any kind
of short position in just about any technology issue would have yielded
a substantial profit over the next year.
Here's a micro example we all recently
witnessed of the same sort of opportunity. TLPE- a big win for OTC
Journal members since November. Note the extended bars to the upside
as the stock trades much higher than normal volume. I would bet my bottom
dollar that this stock ripped up the charts so impressively because shorts
in the $.26 range were forced to cover. Typically, when a stock trades
up this dramatically, it is not because investors want to buy, it's because
shorts are forced to buy.
As I suggested in the January
12th BLOG, the $.41 to $.42 level ended up being an excellent opportunity
to lock in a short term trading profit with the idea of re-buying the stock
as it settled at a reasonable retracement level.
So- how do you know when the streak
has ended? Use the rule of thumb all market makers use- when a stock is
streaking up in the manner TLPE did, you know the run is over when
the stock gaps up, then trades lower than yesterday's closing price. At
that point, sellers will pile in, and the stock will correct. It doesn't
always happen exactly that way, so a good rule of thumb is a partial sale
to hedge your bet.
Had you sold all your TLPE at
$.42, you would not be in a position to buy it all back and more at
$.33. While the difference between $.41 and $.33 is insignificant at the
corner candy store, it is a huge percentage change. If this stock had been
$23 in November, $41 last week, and $33 today, it would have been all the
rage by the talking heads at CNBC.
Here's a look at two streaking stocks
that ended up being excellent buying opportunities. Look at the blow off
in SanDisk (NASDAQ: SNDK) back in November. The stock had been grinding
lower for some months, and in a two day period you had a complete capitulation.
There are two back to back long bars, accompanied by a huge volume day
which exhausted the sellers.
Recognizing an opportunity, buyers
resurfaced, and were rewarded with a mere 30 point move over the next two
months.
Here's a similar chart right out
of our microcap world. Health Sciences Group (OTC BB: HESG) spend
the majority of the fall grinding south. In early December, in a big streaky
move which was accompanied by huge volume, the stock sold off. The long
red bar you see on the big volume day happened on December 5th. Clearly,
someone with a large position decided to throw in the towel on this one
and take their tax loss. One of the best traders I know would call this
the "wash and rinse" cycle. One subscriber emailed me and asked me if the
stock looked like it had achieved the final "capitulation" stage.
Good observation sir. Hope you picked some up at the bottom.
Predictably, the stock has rebounded
to a level it likes for the time being. The trading opportunity has passed,
but there is certainly an opportunity to accumulate the stock now if you
like it. Don't mistake this for being a recommendation to rush out and
buy HESG. At this point, the company is on OTC Journal double
secret probation. If they start providing evidence of real sales developing
in SHUGR, I will change my views. If they don't by the end of March-
syonara HESG. For the time being I would rate it a hold.
If you take anything from today's
edition, then take this. Long bars on the charts associated with big volume
can lead to outstanding trading opportunities. There's one forming now
on an OTC Journal featured company. I hope all of you own lots of
HDY,
because on Friday in a breathtaking late day surge, the stock closed at
the multi month high of $3, nearly a double from when I called it
a stock you have to own back on December
8th. Click on the date and read the BLOG entry if you so choose.
HDY is starting to make a
streaky move with long bars and big volume. Read Friday's post close BLOG
for my thoughts. This one will be a good test. Will you sell for
a trade at the top of this move? Keep your eyes on the BLOG. I won't
be able to cover it in an edition. It will happen too fast to get it out
to you in a timely manner.
Also, do not mistake a "profit alert"
and a sell recommendation for a trading profit as a sign the idea has run
its course. Just the opposite is true. Stocks make big moves because something
positive is happening. If I drop coverage, that's your signal to get out
and move on. If I call something a "profit alert", it means it's time to
take advantage of an exaggerated move in the market to put some cash in
our pockets, and look to reload at a more favorable level.
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