Double Journey

So Jamba closed at $5.30 today. I bought at $5.03 at 11:55 a.m. which just so happens to be where the stock bounced on its way back up. So excellent, albeit lucky, timing on my part. That means if I would have sold on the close, I would have netted a cool 5% in just one hour. Including commissions, I would have made about $114. Of course that is irrelevant since I didn’t sell, and I won’t unless it breaks back through its resistance line.

I want to go into a little more depth into why I decided to buy where I bought so hopefully we can all learn from this. I think Jamba is on its way up, and up significantly, and wish to give you the technical reasons why. Here is the one month chart on Jamba.

The news on the Nestle deal came out on December 4th, and you can see the rather large spike in Volume there. The stock shot up to $4.50 that day, but then pulled back to close at the $3.70 level. This showed that the bears were still in pretty firm control over the stock, as they were able to beat back the bulls that day. But since then, the stock has soared, going from $3.70 to $5.30 today, a 43% gain. For the last four days, the stock has closed pretty near its highs for the day. This is a very bullish sign. When it broke through its 50 Day moving average of $5.00, and it stayed above this resistance line, it further strengthened my resolve that this stock was set for a good breakout here. The stock has been killed this year, losing over 2/3 of its value, so it seems primed to hit a bottom.

I fully expect this stock to retreat tomorrow. People are going to take profits at this level. Those who have seen this stock fall from $10 all the way down to $3 are going to see this as an opportunity to get out of this stock with a little bit of dignity. If the stock can stay above the $5.00 mark in the face of this selling, then that is a very good sign for the stock, and should signal that the bulls have taken over. This will mean that Jamba has hit a bottom and will most likely be in an accumulation phase. For a small stock like this, this could mean very big gains in the short term.

Tomorrow will be very telling.

Despite Rick’s urging, I’m probably not going to buy Apple today. Although I really want to get into the market, this isn’t the right stock to do it. There are many reasons I like Apple in the short term, but the price action on the stock just isn’t shaping up. Here is the one month chart on Apple.

Now look at the last five trading days. See that nice uptrend? That in itself doesn’t scare me. Most people don’t want to chase a stock that has gone up like Apple, and for the most part I agree. But sometimes it makes sense if a stock is taking off, which I think Apple has the potential to do. But look at the last candlestick. You see how it is red? You see how narrow the candlestick is? you see how it is hovering right near the bottom of the price action today? This is a perfect Gravestone Doji setup.

For those not versed in technical analysis, think of it this way. You had a great run up in the stock. Today, the stock tried to go higher, which is why you have the point sticking up. but toward the end of the day, the bears took over and started selling the stock. It ended up slightly lower (there is still about an hour left in the trading day so this could reverse). This is generally a weak signal, but still significant. What makes this sign stronger is the fact that the market overall is up today, so Apple is looking weak here. Confirmation will come tomorrow if there is another sell off in the stock. I think Apple could break 200, but I think it could also fall down to support at the 170 level.