Hangin' By a Thread - Looks at ZZ, NVTL, and DSX
Small cap stocks Sealy Corporation, Novatel Wireless, and Diana Shipping are run through the trading wringer.
It's amazing what you can see when you look at a weekly chart at the same time you look at a daily chart. Take Diana Shipping Inc. (NYSE:DSX) for instance. Had you been looking at a weekly chart, you probably would have noticed this small cap was in trouble while the stock was around $13.50 - rather than at $12.00 - when the triangle shape (blue) began to break down in May.
In any case, I only make that point to make another one about Diana Shipping and its weekly chart.... despite the horrifying move yesterday (and the last six weeks for that matter). we're actually at a rebound point with big potential. The 61.8% Fibonacci retracement line is right at $11.25... right around this week's lows.
That's not to say I expect a bounce from Diana Shipping. It's just to say that if it's going to happen, now's the time. For that reason, let's keep a close eye on it as it figures out its next direction.
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The Sealy Corporation (NYSE:ZZ) demise actually started several weeks ago, when this small cap stock fell under a long-term support line (black) that extends back to mid-2009. If there were any stragglers hoping for a quick turnaround though, I've got some bad news for you - ZZ sank deeper into the quicksand today.
There was a smidgen of hope that this chart would make good on the promise of a floor at $2.90. The $2.84 was also a potential floor, though less of one. Both are marked in blue on the chart of Sealy Corporation below. Today though, the move to a low of $2.75 and a current price of $2.81 pretty much drove the nail in the coffin.
Despite a few more misses than hits from the wireless stock group, I'm still maintaining my bullish stance on the group overall. I just don't think Novatel Wireless, Inc. (NASDAQ:NVTL) is going along for the ride. In fact, I've got a feeling this small cap stock is on the verge of a meltdown.
Take a look at the chart of NVTL below. In the grand scheme of things, it's downtrend city. Over the last two months it looked as if a floor at $5.65 would stop the bleeding long enough to let the bulls regroup. Unfortunately, continued pressure from a falling 20-day moving average line has put Novatel Wireless shares right in a position to crack that floor.... soon. If Novatel beaks under $5.60 again (it did once today already), I suspect that'll be the beginning of a major meltdown - there's just too much weakness here.
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James E. Brumley is a paid contributor of the SmallCap Network. James E. Brumley's personal holdings should be disclosed above. You can also view SmallCap Network's complete disclaimer and disclosure.
