Stock SLCA: Possible Short Term Reversal
Igor Rakhmanov | Jan 20, 2015 12:30AM ET
Following two rounds of heavy selling from an all-time high US Silica Holdings, (NYSE:SLCA) has been trying to find at least an interim bottom over the last month.
On the intermediate-time horizon P&F chart SLCA has formed a double bottom (blue arrows) combined with a reversal pattern – a bearish pattern reversed (orange lines). An upward breakout from this pattern triggered a buy signal (lime box). Should SLCA manage to clear the overhead resistance (red rectangle) and rise to 29 and higher, a fulcrum bottom would be formed and a vertical count with the potential upside target of 39.5 would be activated. Weakening down volume and rising up volume favor this possibility. The recent insider buying in the range of 24-27 is also an encouraging sign.
Let’s zoom in to the short-time horizon chart. Followers of the classical technical analysis can recognize a skewed inverse head and shoulders pattern. Though it may be just random price fluctuations, a breakout on high volume above the falling trendline increases chances of the short-term reversal. Two vertical counts point to potential upside targets of 29.50 and 33. A measured move from the inverse head and shoulders pattern (light blue) projects the target at 32.50.
Since SLCA is still in a downtrend, long positions are at greater risk. If prices fall to 25 and lower, the short-term reversal scenario should be reconsidered.
Disclaimer: Long March 24 Calls. I express only my personal opinion on the market and do not provide any trading or financial advice (see Disclaimer on my site).
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