HG,
Sorry, I've been away from the computer.
As you say, KREM was approaching the potential short entry zone. On my last post, I noted that earnings were 3/8 before the bell, and KREM should not be shorted unless and until it reversed at the long-term moving average resistance "failure zone." KREM now shows why this is the best course with shorts, particularly.
As I'm sure you know now, KREM reported blowout earnings, more than doubling year-ago earnings, and beating the street by $0.05/share. Share prices responded, with shares gapping up $2, and continuing to trade above the intraday moving averages throughout the session, with a close above the 200 day SMA on more than triple normal volume. Note also on the intraday that KREM had been trading above the horizontal or upsloping intraday moving averages for several days:
askresearch.com
stockcharts.com[w,a]dbclyymy[db][pb50!b100!b200][vc60][iUg!Lp14,3,3!La8,17,9!Lc20]
This is a good example of why you would not want to anticipate a reversal, just because a stock was rallying to a level which had previously provided strong resistance: this time, the test at resistance might succeed, particularly if technical momentum were increasing, there was some momentum catalyst such as good news or earnings, or there were shorts scrambling for cover, or all of the above. Anybody anticipating such a failure in KREM is licking their wounds right about now.....
KREM may yet prove to be a good short, but not at the moment, and given the strength of the earnings report, it probably will continue to rally from here, after first retesting the 200 SMA. So now, the very real possibility of a trend reversal in KREM arises, negating the possibility of a short IMHO, other than very short term (i.e., daytrade). To re-qualify for a possible short, I would require the following:
1) Failure at a test of intraday moving average support, then rallying up to the downsloping moving averages, and again failing at the test of resistance, with weakening technicals;
2) Failure at the 200 SMA or 200 EMA support, again with a rally up to that point, technical weakening, and a failure on worsening technicals.
The reason for this is that there still remains the distinct possibility that the bears and/or the options boys will try to force it down so they can cover, and will succeed temporarily. Breakouts are not infrequently presaged by "head fake" rallies, followed by a retracement, then the real thing.
For me, KREM comes off the potential short list, but remains a watch. That said, I am still reluctant to short a stock with so much open short interest. I just don't think you need to incur that extra risk. You can find other shorts that have far less open short interest, and therefore much less chance for a short squeeze rally.
JMVHO, of course......
WS |
