Gauging Odds Of A Breakdown
When the former leaders begin to deteriorate and
reach critical price levels, you will always get to a point where the stock either
has to start showing signs of recovery or it’s going to suffer a major
breakdown.
In looking at this chart of SDL
(
SDLI |
Quote |
Chart |
News |
PowerRating), I can’t help but feel that this
is the “do or die” juncture that has been reached.Â
SDLI has closed near the bottom of expanded intraday ranges the
past three days on surging volume. Today’s plunge on 200% average daily volume
revealed a wave of traders looking to jump ship. To determine the odds that SDLI
will break down below this level we have to take the recent price and volume
action. To me, the entire story is told if you look at the late-July plunge and
the one that is currently unfolding. In both cases you had a surge in volume
suggesting that gobs of traders were piling out the exits. Compare these volume
levels with the relatively light levels that coincided with the early-July and
mid-August rallies. You can see a stock is under heavy distribution and likely
skating on thin ice.
See you tomorrow,
Eddie