<<NITE goes down with the market religiously but does not respond to a positive market, what can be the possible explanation?>>
A lot of technical damage was done to NITE in the last 2 weeks. It started with NITE's lack of strong response to the FOMC meeting. There has been a great deal of selling through FBCO, CIBC etc., for reasons we still don't know, (maybe we'll find out in due time), and a lot of people tried to jump in for an "earnings run" - NITE kept trying to move up, and reached as high as 64+ intraday - but there has been relentless selling, and characteristically, NITE was never able to close anywhere near any of its intraday highs. This is a very strong signal that there is a lot of selling into strength (contrary to Mr. Norris' contention that intraday quotes are meaningless, I find intraday action critical to understanding what is going on with the stock). In any case, I saw the selling on my LII, steadily in huge blocks. This selling finally broke the bulls back Friday - I don't know if the Barrons rumor was the trigger or not, but there was tremendous damage done. What happened is that people who jumped in for the earnings run, got tired of sitting on dead money while the market was blazing. People started pulling out, and the price declined. Monday more people left and the stock just tanked, especially that the FBCO et al selling continued. Tuesday, there was something of a blowout to the bottom, but it didn't go low enough to provide any sustainable sharp reversal rise. The mo-mo guys are mostly on the sidelines, as there is more going on elsewhere in the market. The bears are not strong either, as the selling has now abated somewhat. So, the stock is drifting a bit. You see that with the dropping volume, as there are fewer players.
What is needed is some spark to get the mo-mo crowd interested again. Earnings are coming up soon, and you may see the mo-mo boys try for another run. If the selling has ended (whatever the source of FBCO et al), then shorts should cover (or at least not initiate new positions), and the stock should move higher.
The damage is that there are still some people who bought early in the mid-low 60s who may sell. I don't think the blowout at 52 was strong enough (based on volume) for all those people to give up hope and panic sell at a loss - for that to happen, NITE should have dipped just below 50 (observe, the many posts on boards saying "I'm still optimistic, but if it goes below 50, I'm selling"). This is going to be a drag, as when NITE moves up, it will be met with selling from those who are just happy to get out at breakeven. Why wouldn't they wait to actually make a profit? Two things: the time to make a run, has now grown extremely short, which engenders skepticism, and more importantly - the pattern has been for stocks to sell off after earnings, no matter how good. So, many will say: "hey, I am at breakeven (finally, thank the lord!), and this thing will sell off after earnings *anyway*, and maybe even a day early like YHOO, and maybe there is something bad which is why there was so much selling earlier, and maybe lockup shares will be unleashed, etc., etc., etc., I better get out now, at breakeven, at least without a loss - the risk seems big, but reward very uncertain. Time to get out".
So, you can see why people will sell as NITE climbs - this is the damage I was referring to. Now, if NITE really tanked to just under 50, those people would have sold in a panic, and then the stock would have been free to climb without the obstruction of being met with selling, as the selling would have already been done. But that did not happen, and the volume tells the story - the volume on the $52 day was not high enough for a true capitulation breakdown. Further, had NITE hit just under $50, you'd have most shorts cover (how much lower can they hope to see NITE - better cover, as further downside is limited versus the danger of a reversal) which would sharply propel the stock up - *and*, at that point you'd have a whole bunch of new people jump in at that level, as the valuation would become very compelling. On a day like that, therefore, you'd have seen huge volume - all sellers+short covering+value hunters. Then you could have a sharp reversal and a nice climb. But note, volume on the $52 low day showed that it didn't happen. Which is why you have a stock that simply drifts - wishy-washy bears, wishy-washy bulls, and a loss of interest. In a weak market, it is easier to jump out, and there is not enough strength to move strongly in a positive market - which I hope answers your question. Some folks who are contemptuous of watching the trading action and intraday movements, of course could not have seen this, which is why they did not anticipate the move down from above 60, and which is why they really don't know what is going on. Right now, there is some simple trading activity going on (short around 55, cover mid-low 54, go long, short etc. - over and over again, and during certain times of the day, try for a bigger move) - very boring, which is why I'm concentrating on more volatile stocks.
Morgan |
