July 27, 2005
by David Yu
| Update 9/2/2005 - Position closed for 17.33% Gain (BTO @$7.70 and STC @ $9.035 average on 2 separate lots). Please see my ELN analysis update for more details. |
I’m changing this segment to David’s Trade Talk so that I’d have more flexibility of going over different trading ideas as well as setting some parameters such as targets and holding periods. We can also have a little fun by tracking the performances of these trades. Trade of the Week also sounds way too serious.
ELN is a pharmaceutical company that’s been in a
ton of troubles – from accounting to products, you name it. But I
believe all the bad news had already been factored into the price.
Regardless of my personal opinion about this company, this trade is a
for profit business transaction. It’s nothing personal.
I do enjoy studying the trading volume. That’s where the real story is
told. Back in April, after the second selloff of Elan Corp. (ELN), I
noticed that the selling volume on the second gap down was not as high
and as intense (fewer red bars bundled together). And, there’s no follow
through after the gap down as the fall was fielded by a white
candlestick at the bottom. That was then followed by 2 consecutive up days
with black positive volume bars. Subsequently, the selling volume on the third gap down
was far less than the previous two. The gap was also much narrower. This
third gap down also did not have the follow through; it too was fielded by a white candlestick (blue circle).
And, that's
when I knew the sellers were almost done with what they had to do.
I then saw the buyers started coming into this stock when the second gap
up (blue numeral 2) at the end of April was boosted by higher and more
intense volume than the first gap up (numeral 1) – see blue circles on
volume bars.
And, finally, ELN has been in a Bullish Triangle that’s squeezed so
tight that an imminent breakout seems probable. When that happens, the target price
should be $11-$12 or 43%-56% profit based on my documented entry price
of $7.70.
So, we'll see...
And, here's my supplemental chart that's posted on the Internet trade group forum on 7/20/2005.
NOTE:
There's an update on ELN posted on August 9, 2005.
Click here to go
to that update.
Happy trading!
David Yu