As mentioned yesterday, I'll post a brief analysis of POH today with some of my thoughts for those interested in technical analysis.
Firstly, perhaps one main thought weighing heavy in most traders and investors' minds is the effect of the recent drops in Dow or the broad market XAO and XJO- and how they might impact on POH's price. Is the ongoing correction in the Dow and events in Europe going to derail POH's momentum?
Where volatility reigns supreme, and uncertainty rules the day, I'd like to put chart patterns and even volume second, and take a good look at volatility and time itself as key determinants of trade signals.
We have seen, for example, that POH is indicating an ascending triangle pattern and yesterday was the 4th time it had tried to breakout of that ascending triangle. The very fact that it has consistently tried to move out of the ascending triangle to the upside indicates to us the direction of the move that it wants to go. At the same time, it has closed above the lower trendline of the ascending triangle, and more importantly, it is now positioned in the vicinity of the 2/3 of the base of the triangle where it is ripe for an outbreak. That aside, as I'll be putting aside chart pattern as a secondary item of technical discussion, as volatility then becomes the next key determinant to decipher the stock's movements, I've plotted a chart showing two sets of volatility lines as indicated on the chart below.
Where we are so concerned about sudden and heavy drops, could volatility be useful as an indicator of rebound or rallying activity? From the chart, you can see that it had performed reasonably well to indicate just when a rebound, however short or long it was, would occurred in the past. Therefore, technically, it would not be amiss for a technical trader to revert to monitoring volatility to capture the proper start of the rebound for POH in a similar way to what I have shown. We are therefore looking for a crossover in the volatility lines as shown for a rally or rebound.
Next, can we use TIME to gauge key activity in POH? Wouldn't it be a nice idea if we can discover the likelihood of some burst of trade activity? Now, I didn't say it must be an outbreak to the upside or the downside, because we use the element of TIME to only indicate activity, and we are none the better for knowing the direction of the activity, but just activity. To do that, I have computed the clustering of time days projected from various pivots, and as you can see from the chart, there is a band of days where activity have been projected, with the heaviest concentration of time days overlapping and clustering on the 30th April 2010 ( plus or minus a day). That makes that time day significant.
So on the whole, I will watch for an outbreak of the ascending triangle to the upside which should coincide with a measure of volatility that should lead to a crossover of the volatility lines as a signal of a rebound. As to the timing, well, you have seen that 30th April is significant -plus minus a day ...
If however, in the event that POH fails its test of the ascending triangle, choosing to breakout to the downside ( remember, I'll be using volatility as the key determinant of activity and not the chart pattern which does breakdown ), the signal to rebound will still be the volatility crossover for the rebound and rally...to fulfil the Elliot wave chart pattern with supports and targets already shared with you several times in the past. If you are technically minded, and have a chart package, you can similarly replicate the volatility indicators to monitor the situation.
Phew...heavy reading perhaps, but I hope it was useful to you somewhat, and may even be a good distraction from the hot discussion about the launch of Elixia and the shelf positioning in the Pulse pharmacies and about Asra being made a joint CEO:). Perhaps too, someone might have learnt how to use volatility as a trade signal and that alone would have meant my post today has been at least somewhat useful. Cheers!
Be steadfast in the faith,
dascore
POH Price at posting:
16.5¢ Sentiment: Hold Disclosure: Held
(20min delay)