Hi Stefan - re ENPT
Yes, the 13,8,8 stochastics on ENPT are in the "very overbought" area, though many times this is exactly what is needed for the most strongest of moves.
As Doug has explained it to me, a stock should be at least a little overbought to make a really good move because it shows a scarcity of shares (which made it overbought in the first place), and then if you get any demand at all for the stock, it will necessarily drive the price up faster than if the stock was oversold since most of the shares were already bought up by the first wave, pushing the "overbought" levels even higher as more and more people want the stock and less and less shares are available.
Did you check out the 13,8,8 stochastics from the earlier period I mentioned? (april-july 1997 i think) -- the pattern is very similar, you can see the breakout in july in very high territory....then look at the ensuing HUGE move in price during the next weeks...
You will notice that sequentials frequentially complete at a moment when other technical indicators do not show a buy signal. DeMark created it to get in before everyone else does, in fact, trying to find a "bottom". Basically, think of the sequential as trying to find that moment when the last seller sells, and then by default the stock must start going back up.
the sequential fails quite often, which is why you need to examine other aspects as well. In this case, I see ENPT with very strong earnings history, in moderate accumulation, it has a very small float, strong insider ownership... (ie seems to have some very strong FA going for it) and there ARE some technical indicators that are starting to turn around and support a stronger move up.
Since lots of people follow the sequential, it's natural for some stocks to get a boost the days around it completes the sequential. (that might be why ENPT is up 3/8 today).
That's also why you want to look for other definable indicators to decide on an entry point. I like using trendlines but for ENPT it looks difficult to find some good ones at this level. The 50 day MA is at 14.75 right now and that's mostly why I picked that number as a potential breakout level.
What's your take on BTIC & PRLS, two recently completed sequentials from last week?
-dave |
