Saturday, July 14, 2007

Improving Technicals at MVIS

As many of you know, MVIS is one of my two largest holdings, encompassing nearly half of all portfolio assets. While this subjects me to increased risk and volatility as MVIS has a reputation of wild price movements, it also has rewarded since MVIS has printed a clear and undeniable uptrend since its lows from October 2006.

More recently MVIS created a new 52 week high at $5.90, before plummeting 22% to find support at the level of $4.60. This level of support lined up perfectly with the rising 50 DMA as well as our previous highs in April. As a uptrend progresses, it becomes increasingly important to find support at previous highs. This indicates an uptrend which, is in fact stable.

As evident in my chart, MVIS has done just that. Each sequential high has subsequently acted as support during each of MVIS's retracements. A perfect example of this was the $3.50 high made in November 2006 acting as support during MVIS's retracement from its January high of $4.08.

All this historical information is important, but what does it indicate regarding future price movement? While technical information can generate false signals, one can increase the odds of higher probabilities by systematically aligning multiple charting time frames.

Below the daily time frame, the next shorter duration would be the 60 minute spectrum. Interestingly, for MVIS this time frame prints a perfect Ascending Triangle, which is a bullish continuation pattern. The methodology behind this formation is rather simple to understand.

A stock will become range bound with firm resistance being placed at an establish ceiling. In the case of MVIS, resistance is firmly entrenching at $5.00, which also coincides with a psychological whole number barrier. Buyers continually push prices higher only to be met by selling at this level of resistance. The importance here is the series of higher lows. This indicates that, although the sellers are currently in control they are losing strength as the buyers establish support at higher and higher levels. Each sequential test of resistance increased the probability of it being broke. Thus the more tests, the greater the likelihood of a breakout. Ultimately, conformation is given when buyers push the equity through resistance with an increased level of participation(volume).

Conformation here would(will) come in the form of a higher volume break out above $5.00. If(when) this occurs, I believe MVIS can conceivably run to the level of $5.40


JayR said...

Are you playing MVIS due to technicals are is this a long term play based upon products and increased earnings growth and increasing revenue.


CNL said...

Both...I have a TON of september $5.00 call options and a sizable holding of shares.

My most recent purchase though of August $5.00 calls is because I believe MVIS is getting ready to move in the near term. Developing...

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