Aug 27, 2010 10:04 AM PDT
It's a little bit too hot to step into today, but Leading Brands Inc. (LBIX) looks like it has turned the corner and is now moving higher.
The recovery started with the low from March, and has been guided by a rising support line the entire time. On occasion, LBIX would run away, but was always reeled in shortly thereafter. Given that history, we suspect Leading Brands will also bee pulled back from today's excessive runup. Augmenting that possibility is the fact that - once again the $0.67 level has been met as a ceiling.
The reason we think LBIX will eventually rock its way past that resistance is what makes the last few weeks different.... volume. There's plenty of volume flowing into Leading Brands Inc. now. The choice here is to buy on a dip back to the support line, or buy the break past $0.67. Each poses reasonable risk/reward ratios.
Rodman & Renshaw Capital Group, Inc. (RODM) became well overbought earlier in the month, and is due to pay the price now. The question here is simply, now that the implosion has started, where will RODM end up?
There are a couple of different ways to draw some conclusions, though the conclusion is roughly the same in both cases... Rodman & Renshaw Capital shares are likely to at least slide back to the $3.60/$3.70 area. That's where the 20 day moving average line is (which has been support a few times since March) and that's where the first Fibonacci retracement line is.
That said, don't be shocked if RODM doesn't actually stop the bleeding there - those are just checkpoint targets. This stock is still very overbought, and if tipped over, could incite a massive amount of profit-taking.
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Much like Leading Brands Inc., Elixir Gaming Technologies, Inc. (EGT) appears to have tuned the corner, and is now moving higher... guided by a rising support line. It's happened with a few bursts of higher volume as well. Most importantly though, EGT is like LBIX for the simple reason that you really don't want to jump in during today's huge 40% rally - shares are likely to slide back at some point.
The lower-risk way to play Elixir Gaming Technologies is to wait for the stock to revisit support, which would probably happen around the $0.19/$0.20 area... if it happens. Any rebound from there probably wouldn't hit a ceiling until $0.35, which is....
.... where EGT has topped out three times since November. If that hurdle can be crossed now or later, Elixir Gaming Technologies would pose a tremendous upside opportunity. It's not likely to be a straight shot though.
We applaud the rally from Ariad Pharmaceuticals Inc. (ARIA) between February and now, but seeing how much trouble this stock has had with the $3.00 area before, we have to assume it's headed lower again in the very near future. The fact that it's so overbought it just a little icing on the bearish cake.
To the stock's credit Ariad Pharmaceuticals have managed to find a lot more buyers over the last three months than they've attracted over the last three years combined. It may not be enough though... none of them are overly-willing to actually stay in their ARIA trade, opting to take profits at opportune times instead. Today's an example. The stock open firmly, brushed a high of $2.94, and has been back-pedaling ever since.
As for a downside targets for Ariad Pharmaceuticals, that's anybody's guess. The stock may fine a Fibonacci support level (not shown) at $2.12, or could tumble all the way back to the bottom around $1.00. Just play it by ear.
If you'd like to know of any changes in our opinion of ARIA, EGT, RODM, or LBIX (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.
