Dwight,
I agree with some of what you say, but I disagree with the characterization of SPCT as an inflated balloon pumped up by speculators. At 65, SPCT is still only trading at a PE of at most 30 based on taking $0.57 * 4 quarters = $2.28 EPS. The company is growing at much faster rate than 30%, so I believe that many investors still thought it a good deal even at 65. I also don't believe that the stock started dropping on its own. Look at SPCT's intraday action over the last two months. On almost every day that it did not go up substantially, it started off the day by going down as much as two points. Thus, a two point drop could not precipitate a panic like yesterday's. Furthermore, the stock dropped 8 points in a very short period of time. Maybe at that point, the speculators took their profits, but at that point everyone was panicking.
Finally, for rumors to pop up which move a stock this dramatically without any inherent truth means to me that somebody wanted to cash out (note September 30th was the end of the quarter and so someone could cash out on Oct. 1 and still look good for 3Q), sink the stock, and get back in for another run-up. SPCT is a good candidate for such manipulation because of its relatively low volume and high growth.
I don't subscribe much to TA except as a way of modeling investor psychology (with all the inherent flaws that models have). I believe that yesterday's drop caused psychological damage to the stock. A stock is like a rubber band. It starts out strong and bounces back quickly from an initial shock, but less and less quickly from subsequent shocks until it doesn't bounce back much at all (i.e. AMD). SPCT will probably need some time and good news to recover fully to 65. Of course, I hope I'm wrong.
Richard |
