Now What Do We Do With REED, THQI, and XNPT?

There's little question that THQ Inc. (NASDAQ:THQI), XenoPort, Inc. (NASDAQ:XNPT), and Reed's, Inc. (NASDAQ:REED) have offered up some of the best trading action - bullish and bearish - of late. History is useless today though. The question to be asking today is, what's next for REED, THQI, and XNPT. Here's at least the beginning of the answer.

On Friday, XenoPort, Inc. looked like just another stock that couldn't hold onto its nice gains. Shares soared from $4.25 in early May to above $6.00 by the middle of the month. But, having stagnated for too long just under the $6.00 mark (which has become a ceiling in the meantime), traders threw in the towel with XNPT on Friday, letting it slide lower by 8.5%, to close at $5.38, and under the 20-day average line. Things looked bad.

Well, forget all that. XNPT has snapped back into bullish mode today, rallying to $5.85 (back above the 20-day average line) on strong volume, and testing the ceiling at $6.00 (orange) thanks to a pair of SeekingAlpha articles that put the company in a bullish light. The reason is irrelevant though. What matters now is that XenoPort is knocking on the door of what's become a key resistance line. If it's hurdled, the move could put the finishing touches on what's become a bigger turnaround effort than most people realize... an effort that only becomes clear on this longer-term weekly chart.

As for Reed's, Inc., it's at the other end of the spectrum. Rather than waiting for the breakout, this chart has already rallied.... and perhaps rallied too much. After the 75% advance since the end of April, REED has gotten a little overextended. More than that, shares are looking like they're exhausting the last of their bullish fuel. The stock peeled back from its high on Friday, and is struggling to remain above its open and near its high for today (a doji bar, and a big reversal clue). It's a subtle hint that the near-term bullishness is coming to an end, and a good reason for current owners to head for the exit before the bulk of the profit-taking materializes.

REED is a soft drink manufacturing company. The May rally was mostly inspired by a handful of new distribution contracts and a nice increase in last quarter's sales. The fact that the company is in track to swing to a profit by the end of the year doesn't hurt either. However, that doesn't mean Reed's, Inc. isn't overextended in the meantime, and due for a short-term pullback.

Finally, yes, the video gaming industry is supposed to be on its death bed. That should be bad news for game designer THQ Inc. Somebody better tell that company about its demise, however, because THQI shares are acting like there's a light at the end of the tunnel. How so? After a miserable two years, the stock's finding support at key moving average lines, and is knocking on the door of getting past a key ceiling at $0.75 and making the first serious higher high in a long time. The daily chart below illustrates the idea, but it's this weekly chart that puts it into perspective.

So what's the story? Is THQI really on the mend, or is this just another headfake from a company talking the talk but not walking the walk? It's probably a fakeout. Though the chart suggests otherwise, THQ Inc. is posting bigger and bigger losses, and is essentially trying to shrink its way to success. For relative reasons, investors love it for the time being, which is why a move above $0.75 may be a good short-term trade trigger. Ultimately though, the company is still back-pedaling like most other game-makers.