>>I just read an excellent TA post on the yahoo vivus board #2943. <<
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VVUS stock performance -- chart analysis kgg60
Mar 22 1998
1:56PM EST
Let's look at the chart to see if we can gain insight into what may lie ahead for the stock price.
On 12/9 Vivus dropped their bombshell & on 12/10 the stock broke down badly.
Three successively higher bottoms were made on 12/16, 12/30 and 1/12. These formed the basis of a new uptrend which resulted in a series of highs in the low 15's being made between 1/26 and 2/4. The very (very) significant thing about these highs is that they were higher than the 14 1/2 high on 12/10. If this stock were destinted to fall into a black hole, that would not have happened.
Having failed to break through 15 1/2, the stock entered a new downtrend on 2/5.
On 2/27, when the class action news came out, I was bracing for a disaster since the stock was still in a well-defined
downtrend. While, in an email to a fellow VVUS holder, I described reasons for the stock already having discounted the basis for the
class action & therefore having limited downside from the announcement itself, I certainly recognised the possibility that there
could be a sell-off driving the stock down to new lows. It didn't happen. This was a signal for me that the bottom was near. Also,
a non-scientific survey of mine on these types of class actions has shown that they consistently are initiated when the extent
of the damage is known, i.e., at or near a bottom in the affected company's stock price.
On 3/6, this latest downtrend broke, entering a moderate uptrend.
When the MCA approval was announced, VVUS hit 12 intraday on 3/17, beating the 12 15/16 intraday high made on 3/9. Again, this is significant.
What happened next, I admit, surprised me at first. The stock failed to follow through the next day. In fact, on 3/18 it broke the new uptrend. Viagra fears was my first thought. But the chart I think is telling us something different, I think. When a stock is about to make a major reversal and it is close to its 52 week low, technicians want to see a test of that low before they are satisfied that the stock is, indeed, about to turn upwards.
This is obviously a very scary time for anyone long. Anyone who held firm after the breakdown is afraid of having their investment dollars further eroded. Anyone who bought after the disaster is afraid of holding onto a newly declining asset. This is the whole point of the test as I see it. If the bulls have the conviction to stand by the stock and support it, then they get their way and the shorts start covering.
What to do? If you believe in this stock you must take affirmative action. Do not sit and wait to see how low it's going to go. You must help defend the 52 low at 9 11/16. Understandably, everyone wants to buy a stock as cheaply as possible. Below a certain point this is self-defeating. 9 11/16 is that point. On Monday, 3/23, place your limit orders to buy above this price. The more orders there are, the harder it will be for the naysayers to get their way here.
What next? Once the 52 week low has been successfully defended, the next thing to do is make all the short sellers make us
some money. Start buying agressively at the market. At a closing price of 12 1/16 or better, the shorts will begin covering. At
15 9/16 they will begin to scramble to save their butts, sending the price into the low 20's. A Closing price of 21 or more
will make even the most sleepy money managers wake up and take notice of the reversal, further accelerating the stock price
upwards. Obviously, this won't happen in a straight line, but the price points are valid.
Tomorrow is the day. The battle must be fought. Win the battle and the war is within grasp.
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