Judging by the trading history of the chart, the w
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Judging by the trading history of the chart, the worst case scenario for the stock is 2 cents. That is the intraday low from May 16, 2011 and then again June 5, 2012. It was the lowest the stock ever traded and back in June it was barely there for one tick at the opening bell if I remember correctly for less than 1,000 shares.
This means that based on prior trading history this is as bad as it should get. Treaty is substantially ahead of where it was in June of this year, let alone May of last year. So considering that the fundamentals are significantly advanced over that time, it is logical to believe that there is a high 90% plus chance that there will be bidders at 2 cents for the foreseeable future and that the worst possible case given what we know at this moment is a 2 cent print. (by the way if you watch the L2's there is a lot of bidding at 2.5 cents and above so that's why I emphasize that 2 cents is worst case, because I think it is a low probability event)
If the worst case scenario is a 2 cent print, now a short term trader or heck even a long term investor can make a favorable risk calculation. If a trader buys at 3 cents, and his downside worst case scenario is 2 cents, that means his max downside is 33%.
The stocks spent from mid July to mid August chopping up and down through a nickel. The 200 day moving average is just a half cent below a nickel at 4.5 cents.Prices have a tendency to revert back to where they spent a lot of time so 5 cents is a likely target for the short term.
So, with 5 cents as a short term upside, and 2 cents as worst case downside for the foreseeable future, a trader is looking at a 67% gain vs a 33% loss if they buy at 3 cents. I'm talking about short term traders here, or even guys who want to buy in for a big longer term position but lock in a little gain as insurance. This would allow the short term trader to hold for a 7 cent target for 133% and take a little off, and so forth.
Like it or not, this pattern and risk calculus that I just described should attract at least some shorter term traders that may not be here for long but can give us a lift while we are here, generate some activity, and generate volume needed to bring in some more longs.
That is why I am saying that I am looking at a nickel for next week. I have no secret news, this is just based on trading activity.
What all of us want to see is a healthy uptrending channel where the stock trades up and down like a Sine wave inside of a 45 degree angle supported by the 20 DMA which trades above the 50 DMA and the 200 DMA just below. What we don't want to see is just a big pop, drop, and a return to a downtrend all the way back to the lows until the next catalyst. That is almost an un-tradeable pattern.
I think if this as like running a store. Most of us here are the loyal customers who buy here every day and have built a relationship with the brand. However, every once in a while the store runs a Groupon ad with a discount and the store gets flooded with a bunch of discount shoppers of which 95% are one and done. (That is when the stock pulls back to the low of the trading range) You can't live exclusively off of these kind of shoppers, but you still need their business for that boost and also to find that 5% that convert into longer term shoppers.
The stock needs new money, and most of us "loyal shoppers" have bought just about all we can of this stock at this point. We need some new blood to come in, and although we will eventually get the big boys, we've shown that a bunch of little guys can make a difference as well. That was a long winded answer to why I am looking at 2 cents worst case, 5 cents base case for next week. I might be off but I'll always give you my thoughts on the upside, downside, etc.