Shake Up The Timeframe, Uncover An Investing Gem
Dragonfly Capital | Sep 13, 2013 01:38AM ET
There were a lot of small cap pharmaceutical companies that showed up on my watchlist this weekend. Most were too small to trade so I made no mention. These often get into my universe of stocks when a subscriber or follower asks about them. They may not be good to trade, but sometimes they are useful to learn from. One of these is Transcept Pharmaceuticals (TSPT). The short term chart below shows that last Friday it closed at 3.02, and more importantly over the 50 day Simple Moving Average (SMA) for the first time since August 6th and only the 3rd time since March 4th. The Relative Strength Index (RSI) was breaking the mid line and the Moving Average Convergence Divergence indicator (MACD) has just crossed positive. The bottom looked to be in and the gap fill above looked like a good target. Fast forward
to Thursday and the gap is filled. Is the trade over, it time to lighten up? The RSI has moved to technically overbought so maybe. But you might get a different answer and level of confidence if you were to broaden you view and look at the full 2 year life of the stock. That price level at 2.59 holding as support just got a whole lot more significant. It now looks like instead of looking to just fill the gap and maybe a little more upside to 4 from that 6 months of price action, that a target of 6 is very reasonable. That is the lower end of the yellow box where the vast majority of trading in this name has occurred. I am not advocating that you buy this stock but rather making a point on your perspective. If you always look at 6 months, 1 year, 2 years or whatever, of price action, you may be missing a nuance on a shorter or longer timeframe. Shake up your timeframe when you run through your analysis. You may uncover a gem.
Disclosure: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Original post
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