The stock has been range bound between $21 and $24, with the 50 day moving average at $22. So each time it broke below the 50 day it could have broken down and taken hits like some of our other friends but it did not. That said we had been sitting with a 0.2% stake waiting to see which way this chart would resolve. Yesterday the stock broke out of its month long range (north of $24) on decent volume. Today it is holding up there near $25.
In a bull market I'd pile into this sort of formation with guns ablazing - it's quite bullish on the surface and exactly the type of thing a trend trader with intermediate time frames (weeks/a few months) would want to see. In this horrid market, an intermediate trade means "a 6 hour holding period" so I'll gingerly step up to the plate expecting to lose money within minutes since breakouts are usually sold off within a day or two... putting gobs of egg on our face.
Consider my face egged. Again. It is really quite remarkable how high the failure rate is of stocks breaking out of a long range ... you keep hoping this one is different but knowing the chance is low that it is. Lucy wins again - now the stock is right back smack dab in the $21 to $24 range it's been stuck in, and our newly added portion of the position is underwater. Cheers.
As for the greater market - now that we are firmly below S&P 800 we are turning more firmly to the bear camp... I am not sure what the government has left in their arsenal other than suspension of mark to market and then 'fleshing' out Sir Geithner's plan to save the banks. North of S&P 800 I go back to "neutral".
We do have a weird situation where the Dow Jones is already at November 2008 lows, whereas the S&P 500 is still 50 points away, and the NASDAQ is a mile away. I'm going with my broader measure (the S&P 500) as my tell but it is quite different to see such a difference among the 3.
Long Emergent BioSolutions in fund; no personal position
