Jul 23, 2010 10:31 AM PDT
The bulls are back at it again today, but that doesn't mean they're taking every stock with them. On the other hand, several smaller names appear to be on the verge of huge upside moves..... if you know how (or if) to play them, To that end, here's a technical look at small caps YRC Worldwide Inc. (NASDAQ:YRCW), Cell Therapeutics, Inc. (NASDAQ:CTIC), and ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD).
It may have been the most 'do nothing' stock of the last three months, but I've got a feeling something huge is brewing for small cap company ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). And, if I had to guess, I'd say what was brewing was something bullish. Either way, ACAD needs to be on your watchlist right now, and here's why...
Periods of low volatility are followed by periods of high volatility, whether it's an individual stock or the broad market. ACAD has been less and less volatile since November, as the confines of a converging wedge shape narrow the support and resistance range. That wedge is coming to a point soon though, and ACADIA Pharmaceuticals Inc. will have to move above it or below it..... the high-volatilty period.
My guess is - and this is strictly a guess at this point - we'll see the stock make a sharp bullish move out of the triangle formation. We're seeing major accumulation (bullish volume)... the accumulation-distribution line has been rising for months. And, ACADIA Pharmaceuticals shares are testing the 50 and 100 day moving average lines (purple and green) as resistance... and chipping away at them. If ACAD breaks above them as well as that falling resistance/wedge line, look out above. Until then, keep your powder dry. 
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I actually posted some bullish comments on YRC Worldwide Inc. (NASDAQ:YRCW) a few days ago, but the progress we've made since then merits an updated view. At the time, YRCW had been up four out of five days, and the buying volume was quite strong. That strength really hasn't wavered in the meantime.
In fact, following a modest bearish pushback on March 1st, we've watched the small cap stock come back and post five consecutive daily gains. Volume has been getting progressively better each day too. Translation? YRC Worldwide is attracting a lot of buyers. And why not? The company had problems, but the stock was excessively beaten up. Now with a light at the end of the tunnel, that beaten-up YRCW is an undervalued YRCW (perspective is everything).
Anyway, on a technical basis, this chart appears to still be in recovery mode, and is a speculative 'buy'. It's overbought again today, and I fully expect to see a small corrective move like the one we witnessed on March 1st. I don't foresee YRC Worldwide hitting a major headwind, however, until $0.71, or even $0.92. The former is where YRCW will meet its 50-day moving average line, and the latter is where the stock found a lot of turbulence late last year and early this year. If it gets past that level, the stock could sky-rocket.
It's amazing how quickly some stocks can come and go and come back again. Cell Therapeutics, Inc. (NASDAQ:CTIC) is a great example. A lot of traders (including me) had pretty much written the stock off after it plunged in early February. As of yesterday though, CTIC is right back at pre-plunge levels, and hinting that the bulls are ready to roll again.
Just to be clear, I'm not yet bullish on CTIC again. I'm close to it, but we need to see a little more of a foundation built for this chart before getting to that point. Specifically, I'd like to see Cell Therapeutics, Inc. move back above the rising support line that extends all the way back to October. It's currently at $1.15, versus the stock's price of $1.10. If that line can be regained, it will indicate persistence from the buyers and ultimately lead to a resumption of the prior uptrend.
What I wanted to point out, however, was the island reversal that we've seen Cell Therapeutics, Inc. make. A chart 'island' is a segment of bars that are separated by a bullish as well as a bearish gap. Generally speaking, it's a strong sign of a reversal, and one of the rare instances where gaps don't ache to be filled. In any case, CTIC made a bullish island reversal pattern when it gapped down in early February, and then gapped back up yesterday.
Granted, island reversals are easier to muster when the stock is a small or micro cap and it's priced under $5.00, but it's still nothing to ignore. Like I said above though - just to be safe - let's add a little insurance before getting too bullish on Cell Therapeutics by waiting for the stock to crawl back above its prior support line.
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