Hi JR,
SCLN was in a triangle pattern before the earnings. It broke the triangle support early this month (no surprise after seeing earnings and if you understand this stock is traded as a tiny pharma, not an R&D bio, since it actually sells product).
SCLN is searching for its next strong support to call its home until news hits (and there is still plenty of news left to deliver this year). They have a possible Reverse Head & Shoulder pattern forming here with the current area as the head. To complete the pattern, they need a run to 5-5.25 to set up the last shoulder.
We need to take into account the falling dollar (translates into stronger international sales), oil is to be cut by OPEC again in September (more manipulation of the market which is dampening economic activity all over the world, ...I wouldn't be surprised to see an OPEC member or two defect soon, the 25-28 range is too high, needs to be revised down to 18-25 for a realistic range). The Fed cuts will soon be less and less relevant with each cut (reference the zero policy in Japan). The consumer is king and with each job cut he/she loses clothing. Soon the king will have no clothes.
Knowing this, one thing to keep in mind is that the US is the world's current and only super power. Our consumers help to prop up the world's economic structure. The world will want to protect the US consumer in an effort to protect their own economy. It's a balancing act and not easy but necessary for their own designs on the future.
OPEC will have to revise down their price target range or risk more US development and member defection (by the way, OPEC originally came up with the 18-25 target but greed kicked in). If OPEC revises, the remaining economic factors I mentioned earlier will correct themselves. If they do not, the world's consumers will revolt. There are already signs that the world's consumers are waking up and are ready to lay blame soon. OPEC will soon find themselves labeled a pariah if this keeps up.
As for SCLN, I believe the next earnings will be slightly higher than this quarter. If the dollar stays down or goes lower, we should see increased sales revenue the rest of this year. That doesn't help the stock this quarter but looks more favorable after this quarter. If we are setting up an RH&S pattern, the head can dip as low as it wants to go but the lower it goes, the more power in the rally that follows (top of head to neckline resistance is the distance the rally can garner when the final shoulder breaks the neckline resistance and the rally begins).
Good trading,
JEB |
