Sep 3, 2010 9:02 AM PDT
Though the broad market ended the day at pretty much a breakeven on Tuesday, a handful of small cap stocks found themselves deep underwater. Unfortunately, things may move from bad to worse for a few of these names before the light at the end of the tunnel appears. Here's a look at three of the most vulnerable.
I wouldn't say that Mindspeed Technologies, Inc. (NASDAQ:MSPD) is exactly doomed for failure just yet, though it's sure to be making its current owners more than a little uncomfortable. The string of lower highs since April (there are several falling resistance lines, blue) is the red flag with MSPD. Well, that and the sheer size of the dip today. That tall bearish bar, the short doji bar from yesterday, and the tall bullish bar from Friday all suggest we just witnessed a big swing to bearish momentum.
That said, this small cap does have one last bastion of hope at the 200-day moving average line (green), which has proven itself as support twice this month already. If the bears keep knocking though, Mindspeed Technologies is eventually going to answer. So, the line in the sane is $6.87. 
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It shouldn't be a total surprise that JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) turned tail and ran lower today, though we would have somewhat expected a higher price before this small cap solar name peaked out. Why's that? Because the upper edge of the trading range (orange) this stock is trapped in is actually closer to $6.90 than $6.50. Nevertheless, the pattern is in play again.
Assuming the pattern fully repeats itself, we should see JASO make the move back to the $4.20-ish area within a few days.
And just to be clear, this isn't a judgment call on JA Solar Holdings Co. or the solar industry. This is simply a small cap's chart stuck in a range. 
The cross that Sanmina-SCI Corporation (NASDAQ:SANM) made under its 200-day moving average line (green) today would normally be a sell signal in and of itself. I think in this case though, we may need to wait for this small cap to go ahead and move under the horizontal support line (blue) at $12.67. That's a known support level anyway, and given the size and abruptness of today's dip, we may be due a bounce - even if only a temporary one.
Oh, don't hear me wrong - I think Sanmina-SCI Corporation is taking on water, and will eventually sink under $12.67 and turn into a good short trade. Given the risk/reward/opportunity-cost scenario of waiting to be sure though, there's no need to jump the gun with SANM. 
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