As many of you have been discussing, ESI has experienced a significant retracement, which in my opinion represents a reasonable trading opportunity. I know alot of people have turned negative during this time, but you have to keep in mind you are long in a volatile stock and it is highly unlikely you would ever experience a consistent upwards move in your favour without a decent drawdown. An overnight move to 10c would surely result in a reversal with huge selling just because of the size of the move. I personally would much rather see a slow advance as it's much more sustainable and allows profit takers to get out along the way (and potentially get back in because of FOMO).
In my opinion, the lack of extreme volume says that this may only be one or two sellers with a significant block of shares, liquidating their position (hardly cause for panic). I certainly wouldn't call this a pump and dump given the size of the move and the volume traded. For a good example, have a look at the activity during April-June 2015 and December-January 2016.
This said, you never know the future direction of the SP. So for me personally, I like to buy around decisive areas where it will take a small move against me to get me out of the trade. This allows you to reduce your downside risk as you are buying in a position of strength. I think the largest risk from this stock comes from the pending announcement. With a negative or delayed announcement, you may not have the opportunity to get out for your desired exit price. This is where risk management comes in, and you have to size your position appropriately.
What are other peoples thoughts on this?
I am not sure I have to mention this, but this is most certainly not intended to be used as financial advice in any way. I would just like to generate some discussion around the technicals and try to understand a few other people's approaches.
ESI Price at posting:
1.6¢ Sentiment: Buy Disclosure: Held
