Caution on OVTI
I think the party is coming to an end. Wise investors have a good opportunity to take take the money and run. Here are the reasons.
OVTI is closing in on a major resistance at around 33.00 - 33.30. Take a look at the chart below and you will understand the reason.
Here is my substantiation.
1. The investors who bought the stock during the last months of 2004 are ready to take their money off to break even.
2. I am not sure if this has more energy to run from here
3. The investors are looking to book their profits and
4. The shorts are ready to flood the market with their sell orders.
In my opinion, all the above factors should drag the stock down.
Here is some additional technical analysis if the above not good enough.
If you take a closer look at the charts and the RSI, one can notice that the RSI is declining while the stock is going higher. This deviation is a bearish sign.
posted by Ravi Sankaran at 2:47 PM
1 Comments:
Ravi,
Your analysis is weak for this one. You do not have enough data to yell fire on this.
Here is what you do know:
The stock broke out today on higher volume above a major resistance point on no news.
The amount of time spent at the previous all time high was 1 day. Today's close was the 2nd highest of all time. The quantity of shares outstanding above this price is miniscule comapred to the float. Translation: nearly all shares outstanding were purchased at prices below today's close. All are in the black.
Today's break out is clearly th ebeginning as the multi-year resistance was broken on volume today. There are no more obstacles.
2)The phrase "I am not sure if this has more energy to run from here" is an opinion based on nothing.
3) Investors are looking to book their profits is not quantifiable and guesses at behavior. Guessing is not relevant to analysis.
4)"The shorts are ready to flood the market" HUH? Did you get a phone call? This is the equivalent of CNBC declaring stocks closed down because of "profit-taking".
Although you accurately point out a divergence between RSI and price, there is no direct time correlation between the two. This stock could continue to diverge until it hits 80 before it corrects (not a prediction). Ther eis no easy correlation to time for this divergence and it can correct itself. To wit, the divergence has formed over 18 months. Do you think magically it will reverse itself in the morning? it could take another 18 months to correct and this correction can just as easily come from higher strength as it comes form lower prices. Although I cannot predict that will occur, today's price action makes it a possibility. The spike in RSI is noticeable.
I do not know how you have based your position on this stock versus your analysis. If you are hoping ot buy at lower prices, it is possible. If you are short and HOPING it goes lower, you may be in for a very unpleasant surprise. I have been investing for 20 years and this is the type of stock move that, IMO, usually results in a substantial run (10-20%). The alltime high is not resistance as it has no long term accumulated volume at that level. It has 1 day of volume. Instead, all of the volume that caused resistance was in the 28-31 range. See the recent action and consolidation in this range. Today's action portends higher prices because it represents a decisive move through previous resistance on stronger volume. Ther is now no resistance above. Now it becomes a simple supply and demand issue and it will not take much research to find the evidence that demand is winning. The reason for this can be speculated on but is not known for sure.
Good luck to you. Remember that the cogent analysis requires hard fact, not opinion or feeling. I suggest you practice analysis on stocks you do not own positions in or care about. it allows you to eliminate emotion or hope and the results can be easily be measured and unbiased.
May 03, 2006 4:19 PM
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