VPHM: Ahead Of Earnings

(Click On Charts To Enlarge)

My pre-market comment, on the Yahoo XING Message Board, after XING released earnings Friday morning:

26-Oct-07 09:04 am

"I'm very glad to see these good earnings finally come out. Today, it's important to see how the market REACTS to the good earnings, i.e., we don't want to see any "Gap To Crap," and a slide all the way back to UNCH, like we did on the October 11 rally."

Result: XING had a horrible "Gap To Crap" opening at 10-month H&S Top neckline resistance, got to 13.00, then slid for remainder of the day, closing at 11.27, down 13.3% off the early morning "Gap To Crap" high. UGH...

Going into this week's earnings, VPHM is positioned similarly to how XING was, technically.

In the first chart, we can see that the dominant feature is the 5 1/2 month wedge (in purple), out of which VPHM crashed in July. During the 2 1/2 month Crash Recovery process, VPHM has formed a weak Symmetrical Triangle pattern (in blue).

It's weak because:

1. The chart is bearish, and Symmetrical Triangles "usually" are continuation patterns that get resolved in the direction of the trend, unless it's a reversal pattern.

Well, there's the rub! We don't know that yet because the pattern hasn't been resolved. If patterns were ALWAYS bearish or bullish, the stock market would be a "no brainer," and we know that it isn't. So, we have to watch this pattern and see, but be mindful of the fact that the trend is DOWN, and that any rally is a rally into RESISTANCE.

2. TWICE, VPHM has validated the bottom of the pattern (in blue), but also TWICE, VPHM has violated the lower trendline on an intraday basis, showing weakness.

3. It's a 2 1/2-month pattern that is "possibly" bullish, but it's going up against a 5-month pattern that we know was bearish. "Ye old supply and demand." VPHM, if it breaks out to the upside, has to rally into that 5-months' worth of overhead supply. Longs are trapped in the Wedge (purple), and many of them WANT OUT on the next rally. Not all of them, of course, and some of them already got out in The Crash, or since then, but a lot of them will want to sell any decent rally that gets them out whole, or at a more acceptable loss.

With that in mind, if VPHM can come out with good earnings, and is indicated higher in pre-market, what would we look for?

Naturally, we'd want to get a quick idea of "how good" the earnings are. Did they absolutely blow away numbers, and give very good forward guidance, etc.? If they did, and VPHM has some OUTSTANDING pre-market indication, like BID: 14.50...ASK 14.55, that would be near Purple #5 in the first chart, well into resistance, and players trapped in the wedge might be less inclined to sell, and might be willing to hold longer-term, if the market REACTION to earnings is good. "Some selling" of a gap opening would be normal working through of the resistance, but we wouldn't want to see what I described Friday morning in XING as a slow-w-w blood-letting, steady decline in the stock. UGH...

Looking at the second chart, if VPHM "just beats," .... nothing great, but is indicated higher, I'd immediately be suspicious of a "Gap To Crap" opening that might fail, because of the overhead resistance. If those trapped in the Wedge see VPHM start to slide immediately from the open, many of them likely will get panicky, and want out. Shorts who covered ahead of earnings will be invited back in, especially if it's a "Gap To Crap" to some resistance level that they're watching. Short-term players who buy the opening "Gap To Crap" quickly will realize that they've bought a pig in a poke, and will panic out of it, as well.

Levels to watch for a possible "Gap To Crap" opening:

11.18 (as of today...could change by earnings): That's the top of the Kumo (cloud) basis the Ichimoku Kinko Hyo chart. VPHM failed there exactly, at 14.85, on August 2 on the Bull Trap upside fakeout (see first chart).

11.644 - If we create a parallel line with a slope of 0.03125, identical to the slope of the bottom of the Symmetrical Triangle, it will come in on November 2 right there. A failure at, or near there, would give a strong suggestion that the Symmetrical Triangle has "morphed" (changed) into a Rising Channel, and those also "tend to be" bearish. Not ALWAYS. There were two of those in GIGM recently. BOTH resolved to the upside. Watch for signs of failure there, though.

12.20-12.25 - The extended Wedge trendlines

12.45 - Was the Bear Trap fakeout low, prior to the CRASH. That's the beginning of Wedge resistance, in terms of price.

Message To Oliver (laonda): If you happen to read this, I'd greatly appreciate it if you would link my blog to the Yahoo VPHM Board. I've been getting that danged "Error Message #999" since yesterday morning, and have been unable to post this in case anyone wants to look at it ahead of earnings. Thanks in advance, and best of luck to you if you're in VPHM!