OVTI (Friday close at 17.81)
OVTI seems to be a stock that is getting near to a temporary top after a very strong 5-week run up that started Feb20th at 12.09 and saw a high of 19.75 on Tuesday of last week. The stock seems to be in a corrective phase that fits in well with my channel downtrend scenario, as far as seeing further weakness on Monday and Tuesday. The corrective phase will likely take the stock down to the support level where a short-term purchase might be considered.
OVTI may or may not have seen a temporary top with the rally up to 19.75 but the corrective phase is necessary in order for the bulls to feel more comfortable in purchasing the stock in order to either re-test the high or continue the up-trend. A move down to support, followed by a rally up to test the recent high, is the least that is expected. Nonetheless, it is possible that after a successful re-test of support that the stock may continue higher thereafter. That will be determined after the correction is over.
Support is decent at 17.50 from both a previous daily low close as well as the 50-day MA. Nonetheless, should the support at 17.50 be broken, on a daily closing basis, there is no support until 16.83 is seen (minor) and then 16.30 (much stronger). In addition, the 200-day MA is found at 16.15 as well as a very strong and clearly indicative intra-day low at 15.73. Resistance, on a daily closing basis, is decent at 18.29-18.53 and major at 19.63. Should the stock break below the 17.50 level this coming week, on a daily closing basis, that level will also become a minor resistance as well as important pivot point.
With the weakness expected to be seen in the indexes on Monday and Tuesday, I would expect that OVTI will break below the close-by support at 17.50 and drop down to the 16.30 level (15.73 intra-day). Such a break would be considered a corrective phase break and since the recent high at 19.75 has not been re-tested, a rally back up should ensue after testing support.
Purchases of OVTI between 15.73 and 16.32 and placing a stop loss at 15.63 and having an objective of at least 18.61, will offer a risk/reward ratio of over 4-1. It is possible that OVTI may go higher than 18.61 and perhaps even make a new high above $20, with a small possibility of reaching as high as 21.90. If that were to happen, the risk/reward ratio would climb 8-1.
My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10).
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I doubled up on my position on OVTI today with a purchase at 15.45. I am now averaged in at 15.85.
I canceled the stop loss at 15.53 when the stock closed yesterday below 16.30. The 16.30 level was an important support level on both the daily and weekly chart........but more important on the weekly chart.
In addition, today's drop down to 15.38 was exactly down to another intra-day support level at that price. In addition, the 50 and 100 day MA's are crossing right at 15.60 and therefore this entire move down will likely end up being a test of all of those levels.
I do believe that the stock will rally out of here after today.
I am going without a stop loss for now, but if the stock breaks below 15.00 and into the gap area, then it is in problems.
I put this mention out on March 30th but the stock has not yet gotten down to my desired entry point.
It is likely that today the desired entry point will be reached.
I am trying to see if I can purchase OVTI below the 16.00 level today with a stop at 15.63. Nonetheless, with the close yesterday at 16.34, the stock has fulfilled all it has to do to the downside (re-test of support) and any further weakness, on a "daily closing basis", could be viewed as negative.
Therefore, I am planning to buy OVTI today, hopefully below 16.00, but if it doesn't get down that low, I will step up to buy it between 16.00 and 16.30.
I do want to re-iterate that a close today 10-15 ticks below 16.30 my be seen as a negative, so I would like to see OVTI close in the green today, thus confirming yesterday's retest of the 16.30 support level, as having been successful.