Thanks, Mike! The close above 10 is significant, in my opinion, because it had stiff resistance there for more than a year. With the exception of the brief move through 10 in March 01 on news that Gum Tech was selling their gum manufacturing business to Wrigley, the stock traded between 6 and 10 for fifteen months. Most of the basing occurred between 7 and 9, and the short interest has declined fifteen straight months as well. Generally when a stock comes off a base of this duration and breaks out on above average volume as in the case of GUMM, it has profound implications to positive fundamental events. If you read Gum Tech's last few press releases, and believe what management says, the move up in the stock is supported with fundamental events to be announced in the near future.
It is almost comical to read some of the comments from shorts on Yahoo that ignore all the warning signs. From a risk to reward perspective, it was a good short just below resistance, but I think that it is prudent to cover now that it has broken out. This isn't a biased opinion. When I trade stocks for short term moves, I buy near where I think there will be support and bail if it breaks down. That's where you have the best risk to reward. The converse is true when a stock is trading at resistance. In the case of GUMM, the weekly and monthly charts also have bullish patterns. Given the length of time that I have held GUMM, there will be temptation to sell on the way up. However, since I think this is the beginning of the big rally that I have been waiting for, I'm going to try hard to stay off the sell button, but at the same time keep a close watch on the fundamentals and chart. |
