Aug 27, 2010 10:04 AM PDT
Before anyone simply piles on today's biggest losers, one of which is XOMA Ltd. (XOMA), you may want to look at a chart. XOMA is indeed in the red today, but it's not particularly vulnerable just yet. Take a look, then keep reading.
The fact is, XOMA Ltd. shares have a couple of key support lines working in their favor. One's at $0.85, and the other's at $0.80. Yes, today's pullback is pretty harsh, but check out the volume trend... the buying has come in spurts, but with plenty of buyers. The selling, however, has never been all that strong.
Point being, don't underestimate XOMA here. It's definitely not a prime shorting candidate, and may actually be a bullish idea if it can knock out resistance at $1.09.
How many one-day wonders have you seen like Interleukin Genetics Inc. (ILI)? A little good news goes a very long way, and the stock jumps out of its doldrums into stardom. All too often though, it's only a temporary move.The shape of the Interleukin Genetics bar alone from yesterday could have been a clue as to what was coming. Between the bullish gap and the close at the very bottom of a very tall range, traders weren't looking to stay in ILI - they wee looking to get out, to lock in the profit while they could.
Today's move lower hasn't even come close to closing the gap for the Interleukin chart, yet it's still a fairly decisive hint that there's plenty of supply looking to take some profits.
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They say if something's too good to be true, it probably isn't. That doesn't exactly bode well for our bearish view of Financial Holdings Inc. (FFCH). The chart's slow, bowl-shaped rollover following a huge rally in July is almost textbook-perfect. What's the catch, right? Based strictly on the chart, we have to take thing at face value and assume the current FFCH trend will remain in place. In fact, a full retracement to support around $8.75 is a distinct possibility for Financial Holdings.
The only potential trump card is a big one however... today's volume spike. Were trade volume nominal for FFCH, it would be a non-issue. However, volume spikes are also frequently pivot points as well. Could the selling be winding down today? That's the dilemma...trend versus reversal.
We'll side with the trend for the time being, though a short trade on Financial Holdings shares definitely needs to be kept on a short leash. Safety-oriented traders may want to wait for a close under today's low of $15.52.
Finally, BSD Medical Corp. (BSDM) is another one of those stocks that overshot on good news, and is vulnerable to a major pullback. However, we have to concede that BSD Medical shares have staved off a pretty strong selling effort so far today. Check out the way BSDM is trading well above today's low of $2.92. Even Tuesday's ridiculous jump higher didn't see a terribly weak close (BSD Medical closed in the middle of that day's range). So, the stock is not in any major trouble just yet.
The key to its near-term, of course, will be where the closes are in relation to each day's range. If the closes start appearing at the low end of each bar, and we continue to move lower each day, then BSDM becomes a better shorting idea.... assuming there's any distance left between wherever shares are then and the $2-ish area. [There's no point in shorting it at $$2.20 when there's support at $2.00, right?]
Don't let our supportive chatter about BSD Medical Corp. shares be misleading though - this chart is still very vulnerable to rapid downside movement. The closing price is the key.
If you'd like to know of any changes in our opinion of BSDM, XOMA, FFCH, or ILI (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.
