Wednesday, April 04, 2007

BDC - Time To Sell?




Here's an example of taking your emotions out of the trade. BDC has been a great performing stock. It weathered the 2006 correction well and the Feb 2007 market break. If you're holding the stock, the temptation would be to keep holding. But some signs of trouble have popped up:

1. The week of 3/9/07 the stock made it's biggest point move in the entire run, including largest weekly and daily volume, and biggest daily point move on a gap up (exhaustion), potentially a climax run. Very subtle climax run, hard to interpret.
2. 3 of the last 4 new weekly highs (Past 7 weeks) have come on below average volume. The first time this has occurred in the entire run up. Last 3 days have seen the same action, new 52 week high's, below average volume, well below.
3. As the stock has made new highs in the last 3 weeks, the RS line has failed to confirm.
4. Sales growth has decelerated for the two quarters from 32% to 22% to 14%.
5. Earnings growth has decelerated for the last 4 quarters from 100% to 96% to 64% to 48%.
6. In the last quarter the # of funds owning the stock has dropped.

Now all this doesn't mean the stocks move has to end, but the negative signs are there, and warning that the risk/reward ratio is no longer favorable. My opinion, the stock is now a sell.

Let me know if you have any questions.

PS

Did I mention he's number one across the board in his group? They always look great at the top.
Post a Comment