With the recent volatility in Cord Blood America (CBAI), I’ve been emailed frequently on my thoughts of this stock possibly recovering. Instead of replying individually, it’s best to write up a quick analysis so you can link it wherever you go.
The panic sell in CBAI was expected but, unwarranted. Anytime a reverse split is discussed in pennyland, especially in a low volume stock like CBAI, you can expect this type of action to happen. They key is to stay calm and not panic alongside everyone else as we discussed in the live chat. Instead of selling in the panic, we were buying near the bottom in anticipation that “reason” would finally settle-in and bring the stock back up. This turned a painful hold into a successful trade.
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By the looks of the chart, I expect CBAI has more upside but, it will take more accumulation as we still have many patient sellers looking to de-leverage. Many holders, who are having sleepless nights, are anxious to sell just to breakeven, or as near to it as possible. What this does is create resistance just to get back to $.004. It is unknown if a big sell awaits us anytime soon that could push the bulls back down again so, tread carefully.
The good news is we are seeing the bulls slowly work back up forming what is called an ascending triangle. Typically, you will see the stock highly volatile moving up and down in this formation. This is called back and forth filling. The key point to the formation is that the low should always be a higher-low, we do not want to see lower-lows. This effectively forms the bottom of the triangle indicating the bulls are overcoming the sellers, slowly but surely.
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Since the volume is drying up again, we are seeing less volatility in the trading range but, we are staying near the resistance level trying to push past it for four days now. The enthusiasm level is not high so, we could be stuck at this resistance level a bit longer without more volume from the bulls. I would anticipate a move above this stubborn resistance at $.0033 could draw in more buyers, as it usually does when resistance turns to support.
In a typical big board stock, it is wise to sell near resistance and buy back on a rejection from resistance. The other option is to buy on an aggressive move that breaks the tough resistance, this reduces risk since resistance is now broken (which turns it into a support level), if you can get in quick enough. In a penny stock, this is far trickier to trade. Cheniere Energy (LNG) is a recent example of a big board nearing resistance. Key resistance in LNG is the 52-week high of $9.03. Instead of buying at $9 today, I was selling near resistance with my finger on the trigger to aggressively add if we broke resistance for a true breakout. LNG was rejected again but, I ensured solid profits by selling near resistance with my disciplined style. It is not about hitting a home-run all the time, it is about hitting for average with the occasional home-run and few strikeouts. A rejection in a penny stock is typically a larger push down than a big board stock so again, tread carefully.
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I hope this analysis provides more insight into the technical analysis (psychology) of the CBAI. As always, do your own homework to see if you agree. Good luck out there.
Mike
At the time of publication, Kudrna was long CBAI and LNG but positions may change at any time.
(LNG: 8.97 +0.72 +8.73%, vol: 2,785,411, avg vol: 2,617,490, 50-day: 7.07, 200-day: 4.49, yield: N/A, cap: 498.8M, short ratio 4.00, 52wk: 2.28 – 9.03, 1yr target: 0.00)
