ACOR Bulls now have established:
(1) An upside breakout of the Bullish Wolfe Wave/Bullish Falling Wedge on September 26.
(2) Two successful re-tests of the breakout: September 27 and October 1.
(3) A rally to a post-breakout new high, above 19.14.
(4) A rally above the Wolfe Wave 4 high of 19.78, the first a "higher high," since the Bears took control back in May.
(5) A third day of rally on successively increasing volume each day.
(6) A fourth day of rally with a slightly higher high, at 21.20, but on less volume.
(7) A fifth day of rally, the high of which took out the high of Wave 2.
Technical analysis isn't for everyone, which is perfectly fine, of course. We each have our own approach to the market, but here's the point that I wanted to make to conman when I couldn't access the Yahoo ACOR Board, regarding Martin Roth's "Seeking Alpha" article on October 1, in which he said:
"Bottom line, we have sold these shares short during the past month and believe the stock is substantially over-priced.
Disclosure: Author has a short position in ACOR."
As we know from #2 above, October 1 was the day of the SECOND successful re-test of the Bullish Wolfe Wave breakout, and he's been shorting the stock somewhere in the 15s - 18s, which were the prices "during the past month," which would be September.
To technicians, that was tantamount to saying: "Hi, Bulls. I'm horribly positioned short ACOR on the bullish breakout, and the two successful re-tests of that breakout. Please don't eat me."
This week, the Bulls ate him.
My point is that if we like or dislike a stock, based on the fundamentals, it isn't going to hurt us any to take a look a chart to see if there's anything that suggests to us that we might want to hold off playing our opinion/assessment of the fundamentals.
And, sometimes, it can be downright helpful when we can identify breakouts and breakdowns, like this bullish breakout in ACOR, and the breakouts and breakdowns in the other charts that I've posted here, particularly the THREE pattern breakdowns in GIGM in June and July at 15...14..and, just below 13.
Although GIGM has performed extremely well since its August low, those THREE pattern breakdowns certainly were suggestive of the August smackdown to 9.02 that ensued. I would imagine that during that smackdown, there were more than a few GIGM Bulls who ended up "being right" in their opinion about the stock (it's now in the 17s), but who capitulated and got either washed out buying more...buying more...buying more, or shaken out :(
Ms. Market doesn't make it easy for us, does she?
Conman, thanks again for posting Martin Roth's article, which I've discussed here solely for learning purposes and certainly not to criticize his opinion (or anyone else's opinion)of ACOR. Like the rest of us, he's just trying to play this game as best he can, and I wish him well with his short trade.
Err-r...I mean I wish him well with his short trade AFTER I get out of my long position. LOL.
3 comments:
Melf-
I do respect the work you do, and I do not rule out the value of TA, Perhaps, sometimes the analysis is in the eye of the beholder.
When I look at your ACOR chart, I see a bearish pattern. From the Highs in May to now, a series of lower highs, and lower lows were established. Line 6 (the upside breakout) includes the expected chart move back to about where you indicated stop at $18.99, then........
On sept 25th, ACOR continued it's break out on the heels of the announcement of being added to the NASDAQ NeuroInsights Neurotech Index, on top of this the regular onslaught of Insider dumping ceased. Check out www.insidercow.com to view the insiders dumping like it's their job.
Acor has made similar moves when added to an index, as it forces buying by funds and maybe gets ACOR some publicity. The wave of insider dumping is scheduled to begin either this week or next, and this 25% upward spike will be cut into.
I would ask you, why ACOR sits where it does now, when there has been a secondary, and massive insider selling, yet no new news has come about, why on earth would ACOR move higher? The financials are a sight of horror, and they will once again be needing more money soon.
Good luck.
(Line 6 (the upside breakout)
Conman,
Line 6 isn't the upside breakout. It's the Target Line, dervived by connecting the low of Wave 1 and the high of Wave 4.
That Line 6 "suggests" the price target IF the stock breaks out above the trendline connecting Wave 2 and Wave 4. The target ain't carved in granite ;)
Wolfe Waves are a bit confusing, and rather unorthodox patterns. What I like the most about them is the "fakeout" aspect, at Wave 5.
(When I look at your ACOR chart, I see a bearish pattern. From the Highs in May to now, a series of lower highs, and lower lows were established.)
Exactly, and that's what you're supposed to think because, normally that is bearish.
That's why Wave 5 is the key to the pattern. It's ANOTHER "lower low," that's usually bearish...
BUT IT ISN'T!
At Wave 5, a lot of Bulls get disgusted and finally capitulate, and Bears start drooling when they see the stock make that "lower low," whick often is also a 52-week low, with no support below and the Bears short it right there. Or, even add to short postions.
The sets the Bear Trap!
Both Bulls and Bears are selling at exactly the wrong time, because Wave 5 ends up being THE low for the move, and both groups are trapped there, "wrong-footed," doing the wrong thing at the wrong time.
UGH.
The Bear Trap only is "sprung" if the stock can break out above the top of the pattern (the Wave 2 - Wave 4 trendline).
(why on earth would ACOR move higher?)
Yes, why, indeed?
Because when the pattern finally does breakout, and especially when the breakout was successfully re-tested TWICE, both Bulls and Bears who got trapped at Wave 5 have a moment of recognition about their mistakes, and now they both become BUYERS.
Bulls want to BUY their positions back. Bears are forced to BUY to cover their short positions, and if they don't, they get squeezed higher and higher and higher, and end up BUYING later on in the move up. "Buying begets Buying."
UGH.
Look at the five candles of up days this week. Not particular enthusiastic volumbe, but each candle goes higher and higher and higher, close enough to the Wave 6 target line to consider this Bullish Wolfe Wave breakout a success, in my view.
That's known as a "technically-driven rally" and it has little or nothing to do with the company's fundamentals. Bulls and Bears both are buying for technical reasons.
Looking at this from Mr. Roth's point of view for example, let's say that he shorted at an average cost of $16.50, and let's look at the trade from his perspective.
Each day of rally is "House of Pain" and he has to consider his tolerance for pain. At 21.34, in this example, he's got a paper loss of nearly 30%, which ain't fun, and if he overextended himself by shorting more than he should have, the pain is worse.
He's a human being...he's prone to the same worries that we are: "How high is this going, before I get some relief?"
Mr. Roth might have been a BUYER this week, but ironically, he's BEARISH. Same applies for other shorts, BUYING to cover.
That's also known as a "short-covering rally."
That's probably way-y-y more than you wanted to know about the technicals and the psychology behind the pattern, and this week's rally, but it does help to explain what seems to be inexplicable, from you fundamental point of view.
Thanks for your input on the fundamentals, by the way, about which you seem quite knowledgeable, and for the info on the Insider selling.
Good luck to you!
Melf-
Thanks for the insight on the Wolfe Wave, interesting theory, but I am speculating that this move had nothing to do with the technicals, but the addition to the NASDAQ NeuroInsights Neurotech Index was the reason, and therefore, the only charting I'm using is the straight line up on nothing more then being added to an index.
I see the $19.00's by as early as next week, Fampridine-SR is still a long way from hitting market, or even approval. They have taken a drug that has been around since the 70's that could never get an approval and just altered the compound for a different release, and suddenly this solves the problem?
I don't think it will be that easy, there are many many "red flags" at Acorda, I will continue to check your blog to see what you make of the future moves.
Best of luck
Post a Comment