Monday, August 9, 2010

RAD Watch

Rite Aid Corp. (RAD),the drugstore chain, has moved to bull phase on four major signals with an intraday rise, so far, of 11.6%

RAD $1.04

The move puts RAD well above the sideways range that has marked trading since early July. The move came on a volume spike nearly 4 times Friday's trading.

Now, RAD is a penny stock (well, a dollar stock after today's rise), and that contributes to the magnitude of directional moves, both up and down.

The signals and rise came after Moody's gave a fairly decent rating to the company's new $650 million debt issue.

Although the chart looks like bullish in many ways, this was a move on news. The cat is out of the bag. The debt issue and its rating have already been factored into the price, big time.

So the question at this point is twain:

1) Will there a pullback where shorts can profit?

2) Will there be a continued rise as big money moves in slowly? (Big players can't move in all at once; it's like turning the RMS Titanic.)

I would answer yes and yes. A pullback seems likely. Short-termers will take the money and run. And big speculative money could come in, although probably not pension funds and other institutions, who shy way from low priced stocks like RAD.

Back to the chart:

The parabolic sar, Person's Proprietary Signal (pps) gave new bull signals, and the macd trend changed to rising (the macd was already in bull territory, since early July). The fast stochastic did a sharp reversal from just above the 20 line and moved through neutrality up past the 80 line, which can count as a someone incomplete bull signal.

On the Person's chart, the price burst through two weekly upper pivot levels, which isn the Person's analysis is a caution sign that pullback lies ahead.

Person's Table
ppspps openupper pivotlower pivot
QCOM $1.04 $0.95 aug9 $1.03 -1.0% $0.93 -10.6%

There are so many upside resistance levels to choose from, since this stock has been on the decline since March.

Reversal Levels
  • $1.77, +70.2%
  • $1.22, +15.4%
  • $1.06, +%1.9
  • $1.04 <== You are here.
  • $0.94, -9.6%
Bottom line: For my own account, I don't like RAD very much, mainly because of a deep dislike of trading after the news is out. I take my guidance from the 19th century financier Nathan Rothschild and his dictum: "Buy on the sound of cannons, sell on the sound of trumpets." Today, for RAD, was the trumpets.

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Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
  • psar - Parabolic Stop and Reverse
  • adx - Average Directional Index
  • pps - Person's Proprietary Signal
  • ma20 - 20-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic
About the glance: The colors indicate the state of each signal.
  • trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
  • adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
  • psar, pps, macd: green for bull mode, red for bear
  • sto: green for overbought, red for oversold, yellow for the neutral zone.

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