Traders don't have to look too hard to find a stock that's crumbling today. The question is
, which stocks will still be falling tomorrow, or the next day, or next week? Those are the ones they want to trade, after all. Though nothing is ever set in stone, the names that appear to be headed into trade-worthy trouble are Developers Diversified Realty Corp. (DDR), Orthovita Inc. (VITA), Radian Group Inc. (RDN), and RF Micro Devices Inc. (RFMD). Here's a closer look at each chart and where it's likely headed next.
It's not just that
Radian Group Inc. (
RDN) shares are overbought that sets up a big downside move. It's that they're
very overbought following a huge bullish gap left behind in early August. Moreover, Radian Group has been making a series of lower lows after a gravestone doji-esque bar (
and peak) on the 25th.
Though volume has been light for RDN so far with the strong move lower, the bulls haven't put up any real fight.
As for a target price for Radian Group Inc., a tumble back to $3.76 isn't out of the question. A move back to that level would close the gap, and just as importantly would bring the stock back in line with the ceiling/resistance around that level from May and June.
Speaking of excessive runups,
RF Micro Devices Inc. (
RFMD) is starting to feel the weight of its triple-digit rally from March's low.
RFMD stagnated after one last hurrah in late July. Range-bound between $4.80 and $5.40, most bulls assumed it was only a matter of time before RF Micro Devices broke out of the rut and resumed the prior uptrend. As of today though -
after a 4.4% dip - the lower side of the range is being threatened more than the upper side.
The right way to play this is to be patient and let RFMD break that support line on a closing basis, meaning let's see if RF Micro Devices Inc. shares actually close at or under $4.77 or so. If that happens, it should sufficiently start a wave of profit-taking that will drive the stock lower in a hurry.
If/when the breakdown takes hold, our target price will be $2.00.
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Developers Diversified Realty Corp. (
DDR) has had two chances to break through the ceiling at $8.66, with the second failure just happening last week.
Since then, the market's decided it's not going to happen, and is bailing out on Developers Diversified Realty accordingly.
But couldn't the selling of DDR over the last five days just be a repeat of the kind we saw with the mid-August pullback, which wasn't a permanent condition? Sure - anything's possible. There's a major difference this time though.... DDR didn't just happen to open much lower the next day after testing $8.66 this last time, and
then spend the next couple of days recovering.
This time, Developers Diversified Realty tried to stay in the hunt for $8.66, but heavy selling (as evidenced by volume) has tipped the stock over. While today's big loss
could set up some dead-cat bounce action tomorrow for DDR, we think most of the necessary damage has already been done.
We're looking for Developers Diversified Realty Corp. to return to its range we saw in Q2, somewhere between $4.15 and $5.92.
Finally,
Orthovita Inc. (
VITA) -
which was already in trouble - found more trouble today.
The last bastion of hope for VITA shares was the flimsy support at $4.50. However, with the stock already trending lower for days, hoping for support there was a long shot at best. With today's 5% selloff, Orthovita Inc. shares are at $4.22...
well under any lingering support lines. The fact that the selling volume behind the VITA pullback has been on the rise doesn't leave much hope for a rebound anytime soon.
As for a target price, Orthovita may find its way all the way back to March's support at $2.61, now that the damage has been done; there's no other viable floor between here and there.
If you'd like to know when or if we issue trading alerts specifically for RDN, RFMD, DDR, or VITA, then be sure to subscribe to our free e-newsletter. It's delivered two to three times per week.
