It's the Little Things That Mean So Much: ASGN, LEDS, and APPA Have Dropped Subtle but Critical Hints

While the broad market may be handcuffed by uncertainty regarding the nation's so-called fiscal cliff, a handful of stocks have quietly become trade-worthy anyway. Among the most encouraging are SemiLEDs Corporation (NASDAQ:LEDS), On Assignment, Inc. (NYSE:ASGN), and A.P. Pharma, Inc. (OTC:APPA). Here's why.

If there's one thing we've learned about On Assignment, Inc. over the past several months, it's that the stock likes to move in a stairstep fashion... meaning it surges for a while, then travels sideways, then surges for a while, then travels sideways; see this weekly chart for perspective. And more important right now, ASGN looks like it's on the verge of a near-term surge "up the stairs" after a multi-week sideways phase has been logged. Said another way, this stock is a near-term buy. Better still, it looks like today's the beginning of the breakout move.

The nearby daily chart illustrates why. As you can see, ASGN had been getting squeezed into a wedge pattern (orange) as part of its consolidation period, but if you look closely, the stock's made its way above the upper edge - the falling resistance line - with today's 8% gain. It's a small move in the grand scheme of things, but a huge one given the situation On Assignment, Inc. has developed for itself over the past several weeks.

On Thursday the 27th when A.P. Pharma, Inc. opened much higher (at $0.61 versus Wednesday's close of $0.53, it was a promising time for fans and followers of the stock. After all, not only had APPA hurdles the key 200-day moving average line, it had put the finishing touches on a recovery effort that had actually begun in early December (the 10th, to be exact) with a hammer-shaped, doji-esque bar. The only problem? That strong open from the 27th left the chart overbought, and ripe for a pullback... which sure enough unfurled later in the session.

For most traders that would have been enough to take APPA off their watchlist and move on. For savvy traders though, that dip would have been viewed as a temporary condition within a bigger picture rebound move. Though the bulls didn't get busy again on Friday (the 28th), today's high-volume pop from A.P. Pharma, Inc. is the proverbial second wave... the one that materializes at a more sustainable pace, and therefore is the one you'd want to use as the entry point into a bigger uptrend.

Finally - and this admittedly takes a combination of faith and guts - SemiLEDs Corporation looks like it's hit a trade-worthy bottom. Yes, that's a tough idea to digest, given how LEDS has been in a freefall from the mid-$4's in March of  this year to the current price of $0.76, hitting new multi-year lows today thanks to today's 6% selloff following Friday's 9% loss. But, there's something about Friday's bar that says there's nothing left to give up.

See the volume surge from Friday? That's a blowout bottom for LEDS - a capitulation, or a last hurrah of selling. There are no other sellers [and bear in mind there's never an absolute in trading] left to drive it lower. Yes, SemiLEDs Corporation shares are again in the red today, which clearly goes against the bottom theory, but that could be more momentum-drift than actually selling pressure. Indeed, today's doji-shaped bar so far is another sign that today's the day equilibrium has been hit between the buyers and sellers, opening the door for the buyers to start flowing in.

Yes, it's scary to catch a falling knife, but a willingness to do so can often reap huge rewards.