Back on September 23rd, yours truly took on the unpopular task of explaining how Globalstar, Inc. (NYSEMKT:GSAT) was past the end of its rally and poised for a sizeable pullback. The last meaningful line in the sand at the time was a horizontal support level of $3.68 - if GSAT shares moved under that line and made their first major lower low, that would be the knockout punch. And, given everything that had happened with and to Globalstar up until that point (not the least of which was a ridiculous valuation), the odds of a steep decline were much stronger than the odds of renewed bullishness.
GSAT broke under $3.68 on September 30th, closing at $3.66 that day after trading as low as $3.65. It was subtle, but destructive all the same. Sticklers to my analysis would have made an exit (or even sold the stock short) near the end of that particular trading session or at the beginning of the next one on October 1st when Globalstar, Inc. opened at $3.72 but pretty quickly rolled back under $3.68.
That's when the unraveling began, and when my unpopular take on the future of GSAT was vindicated. Globalstar hit a low of $2.41 that same day - an intraday loss of 33% - before closing at $2.98. As I explained on that same day, however, it was still too soon to go bottom-fishing with GSAT, as more volatility (and more downside volatility in particular) was apt to be in the cards.
Sure enough, on Monday of this week, Globalstar, Inc. hit a low of $1.56.
I don't come here to gloat, however. I come here to say that Monday's bar did end up looking like "the" trade-worthy bottom for GSAT, and from a risk/reward perspective the smart-money move here is betting on the stock to continue rallying for a bit.
Take a look at the daily chart of Globalstar, Inc. Monday's bar has clearly become a pivot, and a good one. It's also a doji bar, where the open and the close are right at the same level, and in this case, right in the middle of a fairly short bar. It's a hint of transition (a quiet one) from a net-bearish to a net-bullish scenario, and the bullish follow-through the very next day confirmed the hint.
While GSAT still has too many valuation problems to make it a long-term position (like a sky-high P/E and no earnings in sight), this decisive V-shaped recovery bodes well for the near-term. While Globalstar shares may relax a little today and/or Monday, there's not any major impediment until we get to the $2.60 area. And really, the ceilings don't start to get troubling until the $3.20-ish level, where a couple of key moving average lines are about to converge. The trop between here and there could be pretty fruitful.
Looking for something bigger? Take a look at the SmallCap Network Elite Opportunity service. It trades fast-moving stocks, in addition to providing you daily market insight and close looks at major market trends. You can even get a free two week trial. Just click here to learn more.
No comments:
Post a Comment