Ron,
Generally, when a support area is reached, there are a lot of people who want to buy a stock that they missed the last time it was that low. In a case of a thinly traded stock like this, there is a good chance that a mutual fund is trying to build a significant position at some level. If they have an open order to buy 500,000 shares at 17, then the market makers would be aware of this as would anyone with Nasdaq level II. It would be wise to pay a little more and cut in front of them. Usually when the fund has built most of its position, it changes it's remaining order to a market to drive the price up 10-25% to get others interested in the stock and to show immediate gains. In addition, since Deswell was a favorite of momentum players earlier in the year, many looked at the earnings report and decided to buy back in. Still, there is a seller out there who wants out. Usually, it's just panic, since they may have margin calls due to the Hong Kong unrest, or they know something bad. If they know something, then the stock will likely rebound a few points and then sell down right through 17 down to the 15 or 13 levels again. Give me 10 stocks with 20-30% growth rates consistently for 2-3 years and a P/E of 9 and I will buy the bucket of 10 as fast as you can blink. Odds are that 1 will drop 20-35%, 2 or 3 will stagnate, and the rest will return 30-300% in the next 2 years.
I like the large volume as it suggests a change in momentum for the short term leg is likely in the next few days. I would like to see larger volume in the warrants also. That usually happens when it starts a run. I think this is a tremendous bargain, but would not be shocked to see it drop to 13 first before climbing. The volume increase says it's unlikely to happen on this leg, but the market is struggling and one large player in this could drive it down on a very negative day a few weeks out. Still, I'll just accumulate if that happens.
Let me know what you think of VIP.
regards,
Richard |
