Kim,
When a stock hits the IL (one or more times) and cannot get above it, the normal course of events is that a new IL must develop before continuation is possible. This process can take months.
If a stock can get above the IL (like RECY did), there is a high enough level of accumulation that continuation will likely occur without the necessity to develop a new IL. In this case, the IL that was broken remains in force and each time it is breached, a reaction can be expected. Once the reaction is complete on IL breaking stocks, recovery is very swift.
The underlying weakness of my studies of the IL is that once a stock gets above the IL, I have, as of yet, found no charting technique to forecast how high ithe stock will go above the IL or how long it will remain above it.
I do know that regardless of how high or how long, a nasty reaction will always occur. I have also found the prevalent determining factor that dictates just how far down one can expect the reaction to reach. As a strategic tool, the IL will allow one to shart a stock near its high and cover then go long at the bottom of the reaction. If you already own a stock before it breaks the IL, you can lock in profit AND go short then cover AND go long once again at reaction support. That combo would amount to huge $$$$. The key to this strategy is patience.
Selling RADAF at any time above the IL locks in profit. Shorting it on top of that requires the patience to wait for the bottom of the reaction. For RADAF, the bottom of the reaction would be 15 1/2 just around the time (a couple days before or after) earnings are released. The bottom of the reaction moves up with time and by the middle of Jan. the bottem moves to 16.
One more note, when people don't want to SELL a stock because they fear missing a larger gain, it's usually time to sell. I am not recommending anything here...just making an observation.
Doug R |
