Stock of the Week: Buying the Selling in Radvision
Radvision might sound like some novel daydream from the Wayne’s World set (“totally awesome!”). But the truth of the matter is that Radvision (NASDAQ: RVSN) is a fairly sophisticated designer of products and software that enables and enhances real-time communications over the Internet, whether that communication is voice, video, or data. Radvision most recently made industry headlines with its new HD video conferencing system.
But for short-term traders, the real news in Radvision of late has been the way the stock rallied from its first significant pullback since climbing back into bull market territory in mid-December.
By the third day of the sell-off, shares of Radvision has dropped by more than 15% and were trading at both new, short-term lows as well as in technically oversold territory above the 200-day moving average. At this point, the focus for most traders in this market likely was on the “failure” of RVSN, and how the stock was bound to continue falling until it was back in bear market territory.
What traders and active investors should have been focused on, however, were the growing oversold extremes in the stock, extremes underscored by the stock’s “consider buying” rating of 8 out of 10 which was earned after three consecutive lower closes. This ratings upgrade hinted strongly that the stock potentially was nearer to a short-term bottom than traders might think.
As the chart above shows, that upgrade was prescient. The correction in RVSN lasted only one day further before buyers arrived in force, sending the stock higher for the next three days in a row.
And for traders using intraday entry strategies to take long positions in RVSN as it pulled back, the rally that followed proved an excellent opportunity to sell into strength only days later. The example here uses the upgrade to 9 as the catalyst for the intraday entry rather than the upgrade to 8. Using a higher rating such as a 9 or a 10 will typically result in fewer overall trading opportunities than with a 8 rating. But in exchange, traders and active investors will tend to experience greater accuracy and larger, per trade gains, when relying on the higher rated stocks earnings 9s and 10s.
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David Penn is Editor in Chief of TradingMarkets.com