Aug 27, 2010 10:04 AM PDT
We've looked at Purespectrum, Inc. (PSPM) a few times in recent weeks, but mostly from a bearish perspective (which worked our profitably). Now, however, we may be changing our tune.
The most recent version of the falling resistance line - which dates back to May, was technically broken by PSPM on Monday with a massive outside day reversal to the upside. Volume behind that potential Purespectrum pivot wasn't great, but it was stronger than the prior day. The stock's followed through since then.
The only problem we see with the Purespectrum chart now is the horizontal trading range that's been in place sine July. If the stock can hurdle the ceiling at $0.40 now that the falling resistance line's been broken, PSPM has a shot at returning to $0.80.
Had we not seen this move from Discovery Laboratories Inc. (DSCO) about a dozen times already, then we might be compelled by today's 40% gain. It's nothing new though, and more importantly, it's nothing that will likely develop any follow-through.... if history repeats itself.
The weekly chart below tells the tale. Discovery Laboratories shares can move higher in a hurry, but they've developed the bad habit of falling back even more.
As for when the stock might tumble this time around, DSCO has a couple of potential ceiling lines. The one at $1.68 is being tested today, while the upper one at $2.08 lies above.
You could make a valid argument that this time is different for Discovery Laboratories shares, as there's a ton of volume behind the recent strength. We don't dispute that, but DSCO has still proven very little.
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We mentioned that TerreStar Corporation (TSTR) was a strong breakout candidate back on September 21st, when the stock was trading at $1.65, but knocking on the door of a major resistance line. Our prospective target was $3.00. Though TerreStar only reached a peak of $2.95 today, we still suggest going ahead and locking in any gain (even at the current price of $2.50).
While it's huge progress for the stock, it's also unhealthy progress. See the way TSTR exploded in June, but then had to retrace its steps and form a wedge shape between July and August? That's what we think's going to happen to TerreStar again now that shares have jumped out of their previous range between $1.00 and $1.50.
Undoubtedly many traders will be 'chasing' this stock after today, but we can almost guarantee you the pros are going to sell TSTR into their buying. Wait for the next wedge/range to setup another similar breakout before stepping in again.
Finally, don't give up yet on Generex Biotechnology Corp. (GNBT) if you're getting frustrated with the lack of progress. Though it's been sinking since the big surge on the 10th, it's still within the confines of a rising support and resistance range.
In fact, there's a benefit to the current weakness from Generex shares.... the pullback has closed the gap from the 10th. If you look closely though, the selling volume behind the dip has been very weak - it's not a majority opinion.
Bottom line? As long as Generex Biotechnology shares can find support at $0.68 (or at the horizontal support line of $0.57), the stock should be ok.... meaning GNBT will likely continue its bullish ebb and flow.
If you'd like to know of any changes in our opinion of GNBT, PSPM, TSTR, or DSCO (or if we officially recommend them as trades), be sure to sign up for our free newsletter today. It's delivered 2 to 3 times per week.
