Technical Review of CNLG, LUNA, KERX, and STEC

Stocks have undone much of last week's damage with today's gains, but the near-term future is still unclear. However, a handful of stocks including STEC, Inc. (STEC), Keryx Biopharmaceuticals Inc. (KERX), Luna Innovations Incorporated (LUNA), and Conolog Corp. (CNLG) are actually setting up some fairly decisive moves.

It's not the end of the road for Keryx Biopharmaceuticals Inc. (KERX)... not in the least. However, an excessive runup in the middle of September has left the stock - realistically - nowhere to go but down in the short run.

This volatile up and down action we've seen from Keryx Biopharmaceuticals isn't anything new. We just expect the two steps forward and one step back action to send KERX back to a major support line that's been in place since May.  The gap from the 16th is acting as the vacuum.


By the time Keryx could retreat back to the support level, it'll be around $1.55.

At first glance, you may think STEC, Inc. (STEC) is showing up on our review list because the pullback from earlier in the month has halted, and the market's consolidating while it decides what to do next. However, we're presenting STEC as an idea that's subtly more bullish than neutral.

Yes, STEC, Inc. shares are trying to regroup, and are even hinting at a bullish rebound. What caught our interest, however, is today's stronger buying volume following a dwindling degree of selling volume during the pullback. In other words, the tide may have turned more for STEC than the bars alone suggest.

It's also worth pointing out that STEC got much closer to filling the July 15th gap (at $28.27) with last week's low of $28.35 than it did with the August pullback. Perhaps that will suffice and unchain the stock.

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At first glance it may just look like Conolog Corp. (CNLG) is yet-another low-priced stock that's going to be a one-day wonder (or two-day wonder in this case.... last week's peak of $3.24 is being approached again today). As such, the chart may be one to simply mentally discard.

However, when you zoom out to a multi-month view, it's pretty clear that Conolog may be working on a paradigm shift.


The key to any further upside is still resistance around $3.20; it's been a ceiling several times (despite brief moves above it) since the fall of last year. However, CNLG has pulled in more buying volume in the last four days than it has in the prior four months. This may be the shove to finally know it out of the rut. Don't jump on the Conolog bandwagon until it happens though.

Finally, you may want to get off the Luna Innovations Incorporated (LUNA) bandwagon while you can. This stock was a one-day wonder that's now just pushing its luck.

The notion that the bulls are running out of steam on Luna Innovations shares primarily stems from the facts that (1) volume has been very strong today, and (2) the stock's headed back to where it opened, which is also where it closed Friday. That's a sign that the sellers are just as active as the buyers today, on a net basis (the fact that there are a lot of them further suggests the strong interest in taking profits). The end result for LUNA today is likely to be a gravestone doji... a bearish reversal pattern.

Bottom line? Not only is Luna Innovations not a buy here, but it's actually a sell for the time being. We're looking for LUNA to at least slide back to the $1.00 area.

If you'd like to know of any changes in our opinion of KERX, STEC, CNLG, or LUNA (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.