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Strategies & Market Trends : Steve's Channelling Thread

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To: Paul A who wrote (4640)	8/25/2000 2:42:39 AM
From: Larry Brubaker	Read Replies (1) of 30051

Paul, the holy one is one of the hardest-to-figure stocks out there. Big moves up and down come out of the blue. Just a theory but there is a big short interest on the holy one, and I'm guessing a lot of that short interest are shares that are hedged by the various purchasers of private placements by the company. My guess is the holders of these hedged shares cover some in the $14 to $15 range, wait for the next up move (maybe even help to get it started), where they re-hedge. We saw similar action in the spring and summer of 1999 when Castle Creek was holding floorless convertibles and the short interest on the stock was increasing. It would fall to $5.50 or so where buying would invariably kick in, eventually rise to the $8.50 to $9 range, where the selling hit. At the end of July, the floorless conversion window opened and the stock eventually fell as low as $4, before it began its big move to $40 on the announcement of its first orders and the overall tech. stock mania. The current $15 floor on the stock reminds me of last year when the stock seemed to be "managed" in a trading range for much of the year. The ominous sign is that the short interest now is bigger than it was at its highest point last year and growing. It suggests to me (presuming there is something to my theory) that at some point, whoever is putting a floor on the stock may decide to go ahead and let it fall. Given that it has been 9 months since the last order large enough to quantify, and given they have shown no signs of being able to achieve the $75 million run rate they claimed they were capable of a year ago, I think the clock is ticking on a collapse in the stock price, unless they demonstrate real evidence of the ability to ramp production.

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