Hi yassinzineb,
I agree with Reid that the very low volume in PVCT makes technical and chart analysis a very dubious proposition. There are exceptions to this general rule--sometimes low volume low price stocks can be traded this way, but it tends to be unreliable.
So, take the following for what it's worth.
<< After agreat run up,it's normal for the stock to consolidate. >>
Providing the stock is in a long-term uptrend, that is true. But it is more common that the stock correct. Down.
But PVCT is not in an uptrend by any technical definition in the first place. It failed at the 200 sma and confirmed that failure, and that was further confirmed with a bear cross.
stockcharts.com[w,a]daclyyay[dd][pb50!b200][vc60][iLg!Lp14,3,3]&pref=G
The burden of proof now rests with PVCT. It has thrust through the 200 sma, but has not confirmed a trend change. Most likely, this represent a bull trap IMHO.
<< PVCT is certainly not overbought right now. >>
That depends on how you define overbought/oversold with this stock (this varies somewhat from stock to stock).
From the standpoint of the BBs, PVCT sits right in the middle, and is therefore neither overbought nor oversold.
But from the standpoint of the momentum indicators, especially the stochastic, PVCT is definitely overbought, since the stochastics were very recently above 80 and formed a sell signal there. This was preceeded by a sell signal in Williams, and followed by MACD confirmation, as you can see on this chart:
139.142.147.218
Personally, I see little evidence from technical indicators or the chart that would support a long position at this time. Rather, the bulk of the evidence is most consistent with PVCT trading down from here, probably to the lower BB rail ($0.68), which would mean that this was indeed a bull trap since the 200 sma currently sits at $0.90. If this occurs, a move back down to test support at $0.50 would be likely.
<< the upside is much greater +50% >>
Maybe so, but I can't see it. What evidence/information supports this conclusion?
But again: stocks with this kind of volume are very easy to manipulate in either direction. To the extent that this occurs, it will make technical and chart analyses unreliable. That's because a stock can have a great chart and technicals, and all the retailers are foaming at the mouth over it, but that is a setup for professionals who can manipulate the stock. They can easily step in, take short positions, and methodically and quickly walk down the bid. In fact, taking short positions in the first place will tend to produce this very effect if they time things right (and they know very well how to do this, that is their profession). They know this will scare the hell out of the retailers who they know are watching the charts, and who will play right into their hands by selling. The reverse sort of situation is entirely possible as well: a stock can be screaming sell, and they can step in with size anyway and walk up the ask, drawing in retailers who they will then sell their shares to at a higher cost basis.
As Reid pointed out, there are exceptions, and sometimes penny stocks can be traded with TA successfully. We have posted about some of these here over the last several months, and some of us (myself included) have repeatedly successfully traded these just on technical indicators. But I scale back the position size because the risk is higher.
Hope this helps,
T |
