Geri,
That little SHOOTING STAR that we had on ONSL on Monday's trading only indicated an end to the upward move. IT IS NOT A MAJOR REVERSAL SIGNAL. For a more bearish scenario, I would look for a pattern called a DARK CLOUD COVER, or a BEARISH ENGULFING. Please see the URLs below for a description of each.
Only upon the development of such candles will I become interested in opening a short position-- and even then, I might wait a bit longer for the last second buyers to get shaken out and for the other technical indicators to weaken. A stock rarely goes straight up, and then straight down. Sometimes they just drag on, like a mortally injured person, dragging itself along, sometimes having the energy to stand up, but with time eventually weakens and fades away. Look at Zitel(ZITL), or Ault(AULT) in last year's trading, and you'll get a better picture of how such bearish scenarios can turn out.
Of course, one needs to verify the fundamental position of the company to make sure that the technicals are VERIFYING the fundamentals. You increase your chances of a successful short if the two coincide.
One I am growing more interested in is Amazon.com(AMZN). Barnes & Noble is going to eat into their profits, as there are few barriers to entry on the Net. Despite AMZN being a company that is expected to continue losing money all the way into the end of next year, the market is valuing it at nearly $1 billion. I was thinking of perhaps setting up a "hedged unit"(my own term for the following), by going long on Barnes & Noble(BKS) and simultaneously going short on AMZN. With the two being in the same sector, a rise or a fall for both will cause the position to stay flat, but in the long run, only the fundamentals will stand out. It is a bet that BKS will beat AMZN, in the same way that MSFT is beating NSCP. I know I'm going way off on a tangent here, but I just wanted to add one more thing, for those who might consider doing this: it might be a good idea instead to use options as proxies, so losses for such positions can be limited only to the extent of the premium paid for the options.
Well, I've gone way too far, and perhaps answered more than you would have liked to have heard. To conlude my opinion on ONSL, I don't think the scenario is bearish enough to warrant a reversal, but I think that for the short term, the advance has been halted, and may initiate some consolidation at current levels. There is a Hammer that has formed on it though, so it seems that there is some unwillingness from traders to allow this to weaken further.
Regards,
Rainier
Shooting Star: scifi.co.uk
Dark Cloud Cover: scifi.co.uk
Bearish Engulfing: scifi.co.uk |
