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Strategies & Market Trends : DAYTRADING FOR DOLLARS
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To: Logistics who wrote ()3/12/1999 8:06:00 PM
From: kendall harmon  Read Replies (1) of 639
 
I am looking for a bounce in RAD on Monday because:

(1) This stock has a huge short ratio of over 13, meaning it will take more than 13 days at average volume for people short the stock to cover their positions. Stocks with heavy short positions have a greater chance of bouncing up significantly. PDX is a recent example of this kind of action.
(2) There was a massive surge in volume today, leading to what nimble trader Alan Farley (see his site at hardrightedge.com calls a volume spike signal. Simply put, stocks that sell off like this tend to have a short term snap back rally the next day, even if it is only a dead cat bounce.
(3) There were positive analyst comments after the close. From the Bloomberg news piece: “Merrill Lynch analyst Mark Husson said Rite Aid's ''fundamentals'' remain strong, noting an increase in sales at stores open at least a year of 9.8 percent. He rates the shares a ''buy.''
(4) There was an end of day rally into the close. The stock bounced up from 22 ¼ to close at 22 9/16, and a number of trades after hours went off at 22 ¾ on the pacific stock exchange. Stocks that rally into the close are much better bets to gap a bit the next day.
(5) One of the biggest reasons for the panic selling today was concern about the company's short-term financial condition. Just after the close, however, Moody's said that the outlook for senior unsecured notes was “stable.”

The company overextended itself, and there will be an earnings short fall in the next quarter. Nevertheless investors overreacted to this story. Look for prices of at least 23- 23 ½ on Monday.
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