Hello Thanh,
<<<Give us more substance please. With all the negative comments you have, I do not see any reasons for the stock price to rise to $17 to $19.00.>>
On current fundamentals, I don't know how this stock will reach this level either. In fact, based on the current -'ve articles and future uncertainty surrounding this company, one could conclude that the stock should be trading in single digits. On a pure technical basis, the story is quite different.
[In an earlier post, I indicated the support and resistence levels and how I derived them. Until the stock breaks the support level ($13 +/-
1/4), I believe that the trend to the upside is still in place.]
Here is how I base my prediction of $17 - $19.
1) Based on the Contarian viewpoint:
Take a look at the June, July, August, November call options. In all these months, there is a strike price of $17 1/2. The last time
the stock traded at $17 1/2 was way back in Nov/96...or six months ago. During each of those last six months, the 17 1/2 call options
had expired worthless. A lot of investors had lost their money
playing these option. Frustrated and 'burned' many times, I doubt they will return to the table.
From a contrarian viewpoint, this is a good sign as when the small investor throws in the towel, is when the stock begins to move up.
Call options with strike price of $20, $22 1/2 and strike month in 1996 have stopped trading (as of May, 1996). January/97 20 and 22 1/2 call options are however trading indicating that the stock
has potential to trade in the low $20's should fundamentals improve
next year or in the latter part of this year.
Professionals on Wall Street or those making a market in this stock will ensure the stock strikes at least $17 1/2 this year.
You will not see the 1996 high at $15 5/8 when last year it was
trading as high as $23+. I believe you will see it as high as $19 if not any higher (small chance it could be in the 20's but under $23).
2) The typical "cup" shape:
The NOVL chart is typical of a company undergoing the trashing
it has undergone. The technical "U" shape (otherwise known as the
cup w/o the handle) will be complete when the stock strikes $19
later this year.
3) Management talk helps:
NOVL management predicts sales to come in at $400 million in the
next quarter. Whether this will happen or not remains to be seen.
The fact that insiders have made a prediction gives the street a
number on which they can base their earnings forecast. Prior
to earnings release, the street will give management the benefit of the doubt and probably push this stock to the $17 1/2 level (i.e the next strike price since $15 was easily achievable)
4) History repeats itself:
History indicates that companies which run into problems don't
get hammered immediately (i.e K-MART, Unisys, etc...) after hitting
a 52-week low and without hitting a 52-week high in the same year. Bargain hunters will jump in...some will make a profit and many will lose their shirts. The next batch of investors then take over
and the game goes on and on.
5) Takeover speculation
Finally, takeover talk may be the factor that pushes this stock above $17 as it did twice/three times last year.
Whatever it is that pushes this stock price up, the stock will attempt to strike a 52-week high sometime this year. It started the year at $15 - $16....so expect it to go beyond this level in the next six months.
My timeframe of 12 weeks allows for the stock to strike at least $17
and onto $19 later in the year. If fundamentals do not improve, expect
a 50% drop i.e $8 - $9/share
V.K
P.S That is my logic. Base your investing in NOVL on fundamentals
and I would suggest you look at another company that is solid
with real earnings potential and has the backing of Wall Street
analysts. Philip Morris, LCI, Bay networks, EMC etc...
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