Yesterday's fall has taken the stock below the 200 DMA. It will be great if it can rebound with volumes and cross above this crucial level again in the the next few sessions. In any case, MGT is approaching the zone of strong support. It had taken off from around $3.27 levels recently, and there was a lot of consolidation and base building before it started moving upwards. The Markman hearing in the lawsuit against the gaming companies is approaching. Usually, the run up to this hearing leads to a lot of positive movement in the stock. The recent move in MGT was, however, based on speculation that it may be in talks with the gaming companies for a $150 million settlement. Management has not confirmed this news but it is quite possible that all parties are trying to avoid the agony & uncertainty of the trials etc. But if MGT is being approached, it definitely means that there are merits in the lawsuit. Though the management has already put a figure of $4.5 billion on the potential of the lawsuit, the Markman hearing will give a more accurate figure of the possible claims related to damages / royalty. For MGT, the current levels seem to be a steal if one begins to factor the possibilities. Of course, there are risks, but if a settlement is indeed around the corner, then at least one can be confident of the prospects of the case. Technically, it has to cross the hurdles decisively, and give a few closes above crucial levels. Consolidation above recent highs will give the first signal that the Markman effect is starting to show its magic. Considering the overall picture, the levels appear to be attractive and it makes sense to keep the faith (with a suitable stop loss).
I think it is good to track the moving averages but in this case, with the stock historically being so thinly traded I don't believe the moving averages are very meaningful. Having said that, I am watching the stock closely to see where we establish a new base. The buy/sell action on Friday was pretty consistent in the $3.70/3.80 range. It will be interesting to see if we establish that range as the new base or if we drift lower. Personally I think there is good support around 3.70 and I expect the stock to hold that range and trade up next week now that most short term traders have exited the stock, hoping to buy in at a lower price. The very fact that traders want in at a lower price means it likely won't happen.
I am still mysified by the volume traded over the last 2 weeks. Assuming 3.5 million shares outstanding and 43% held by insiders that leaves about 2 million shares that are actively traded. We had 2 days with about 1 million shares traded, mostly on the buy side, and the stock only moved about 40 cents up each day. Given past liquidity where did these shares come from and why didn't the stock move up more dramatically? Next week I expect to see an SCD 13-D filing which is required within 10 days of any investor aquiring a 5% equity stake in a publically traded company. If there is a 13-d filing reported that alone could easily move the stock up further. Not likely - but clearly the best scenario would be a 13-D filing from one of the defendants in the current patent lawsuit indicating that they were buying the stock as a hedge.
Regarding the Markman, there is still no date, but we know it will likely be some time in 2h 2013. I don't believe any of the trading action is related to a Markman hearing at this time. It's too early.