NVLS

[David Randolph]

Beautiful NVLS, with 9 analysts downgrading it since October and the company aggressively buying back its own shares, I would say NVLS is one of the safest bets in the entire Nasdaq:



The talk says "sell", the money says "buy", in the end, money always wins.

[Melf Elf]

I'm thinking that Goldman has been short, and that they've been getting hammered on the DOUBLE Short Squeeze breakout of November 13.

On October 8, NVLS gapped down, and broke below a Rising Channel (pattern in red).  The low of the channel was 26.05; NVLS found support at 26.13.

NVLS then went back inside the channel, formed a neckline (29.43...29.39) of a Bulish Inverse H&S (pattern in blue), put in the Right Shouder, then on November 13, had a DOUBLE breakout of both the Inverse H&S (Short Squeeze #1...S1 on the chart) AND the top of the Rising Channel (Short Squeeze #2...S2 on the chart).

Short Squeeze #3 was on...S3 on the chart... exactly at the opening price of 33.56 on Friday, which was just a fraction above the December 11 high of 33.557.

NVLS eased off a bit to 33.17, giving the shorts temporary relief, but when it came roaring back above that "stop busting" print of 33.56 , Short Squeeze #3 really was on, pressuring the shorts right into the close.

It was a "stop buster" because anyone shorting the stock this week, and using that Monday, December 11 high of 33.557 as their Buy To Cover stop (which they should), got busted, and was forced to cover. 

If they didn't cover at 33.56, where they "should have," they're under water on the trade this weekend, and they have to worry about NVLS scoring new highs from here.

Never mind about the other TWO Squeezes IN PLAY.  Those players are in an even worse situation if they didn't cover the November 13 DOUBLE breakout.  They've been trapped in their short positions for over one month.

It general, it isn't a good idea to go shorting upside breakouts, or go shorting stocks that are making new highs, e.g. that November 13 DOUBLE breakout at 29.44, and at 30.10.

Yeeks...murderous on the shorts, and with Goldman downgrading NVLS so vociferously, I suspect that they might have gotten their you-know-what caught in the squeeze.

Goldman likely is in trouble on this one.  If they're short the November 13 DOUBLE breakout (or short before that), they've been dragged higher and are feeling some pain.

NVLS "could" make a Double Top here at/near 34.75 (the high of Red #3), then go down and break below the channel, but again, I'd want to see some kind of failure like that before I'd consider shorting a stock that is acting this bullish.

On the upside, if the 34.75 high gets taken out by very much, NVLS could run.  We've seen in a number of other charts, how Short Squeezes can be merciless, and very unforgiving, e.g., SWIR, NVEC, TZOO, NTRI, GIGM, etc.

If all of the analysts that David has mentioned, who have downgraded NVLS, are short NVLS, there's plenty of fuel for a rally on short-covering alone.
 

[David Randolph]

Thanks for your analysis Melf Elf (applaud)

The Nasdaq 100 was down 0.97% yesterday, yet NVLS was up 0.52%. It tells you something, doesn't it?

I know it's hard to see the market defying such "brilliant" analysis from big powerhouses, but the market always knows better. I like to know what I'm doing, but then I submit my analysis for market approval. If it says "no, you're wrong" I say "thank you sir, I'll close my position immediately".

But when it says "you're right David" like it is saying on NVLS, I say "then I want to be paid, and paid handsomely, for being right". So I'm not trading sardines here, NVLS wants to give me big bucks and all I have to do is sit tight and let the profits run. Because, to win, you don't have to just be right, you need to have the patience to wait for the full reward.

You can learn as much from partial victory than from defeat.

I'll continue holding NVLS.

[thai626]

You're exactly right David.  Sometimes you just have to go with what your gut tells you.........and my gut currently says to buy NVLS.

I was very saddened with letting go of DIVX at this point since I could've pocketed much more if I had let go but "O well", they'll always be an opportunity to jump back in. 

Let NVLS be the next MAMA mia.  Woott wooot!!

Thai

[David Randolph]

You're exactly right David.  Sometimes you just have to go with what your gut tells you.........and my gut currently says to buy NVLS.

I'm happy you joined us on NVLS thai626

My gut isn't talking to me anymore, and I'm happy with that. My reasons for being bullish on NVLS, simply put, are:

1) The initial analysis of this thread, which tells me NVLS is undervalued when compared to its industry peers. I also enjoy the aggressive reduction in the number of shares outstanding, it shows me the company is buying back its own shares, so managers agree with me when I say it is undervalued;

2) 9 downgrades from big powerhouses and the stock is up. This tells me demand is outstripping supply.

So I think I'm right in being bullish on NVLS, and of course I expect to give myself money by having the patience to wait for it.

Good luck for us thai626, but don't expect NVLS to do nearly what MAMA did, just compare the two market caps and you'll see that's pretty much impossible.

I almost forgot, technically the stock seems to be building an ascending triangle formation, which is a bullish technical development. 

[David Randolph]

NVLS continues to build the ascending triangle pattern. I expect a bullish breakout  of the $34.75 short term resistance level before the end of 2006.

[David Randolph]

NVLS is showing some short term relative strength as it continues to trade within the ascending triangle pattern. Just a bit of a bullish breeze from the general market and I see NVLS taking off to $36 or so.

Fundamentally, as everyone can read on the initial analysis, I see it going to about $44.

No reason to sell, I'll continue holding.

[David Randolph]

NVLS continues to build its ascending triangle technical pattern. On Friday the stock touched the $33.55 support level, prior short term resistance. I expect it to breakout above $34.75 next week.

[David Randolph]

Volume was a bit slow because of the holiday period, but NVLS is just one little step away from breaking out above the $34.75 resistance level. Making 7.3% on this trade, I won't let go of NVLS soon.

[David Randolph]

You almost can't see it on the chart below, but NVLS did it, it closed above $34.75 Just by 2 cents, but it's a start.

People that sold short on those 9 analysts downgrades will need to buy to cover this stock and make it run to $37 or so over the short term.

I read this thread again and NVLS's trade looks easy: I should hold the stock until $43.75 is reached and then make a new fundamental evaluation of the stock. In the meantime I should just patiently hold.

That's what I'll do.

[JKN]

I expected that a solid break above 34.75 would bring in a bit more volume, from the shorts and the technical buyers.   I don't doubt the fundamentals but with the Dow making new highs and NVLS breaking its recent high on that same day, I really expected more.  Maybe the traders are all in the Caymans for the week...combined with recent downgrades and the holidays...maybe just a low volume time of year.  I have more time to analyze since my family is gone for the week and I'm on vacation.  I can stare at the charts a bit longer than usual.

Anyway, the weekly chart tells me we have a pretty clear path up to the $44 range. 

In the end, I'll trust what the market tells me to do...

Hmmmm, where have I heard that before !!!

[Melf Elf]

I expected that a solid break above 34.75 would bring in a bit more volume, from the shorts and the technical buyers. 

JKN,

Good observation.  Applause.

I did, too, and I also expected to see the W-Bottom target of 35.05 get MADE.

The W-Bottom broke out, and Short Squeeze #3 was on, when NVLS printed above  33.557 on December 15.

Notice that the low of December 22 was 33.55 exactly, validating that breakout as support.  That was nice.

Yesterday, however, is a possible Bearish Doji Star Hangman, which is bothersome. 

It's hard to imagine that it is, given the new high in the stock, and particularly given the fact that a TRIPLE Short Squeeze is on, but if 33.55 validated support gets taken down, I wouldn't like it.

NVLS should be able to capitalize on the new high and the TRIPLE Short Squeeze.

If 33.55 validated support isn't support, and if NVLS then also breaks below the bottom of the Rising Channel (pattern in red), that would be another indication of a possible Double Top on the heels of the "possible" Bearish Doji Star Hangman.

Just something to watch for...we always have to look both ways. 

The bottom of the Rising Channel comes in on:

December 28 - at 33.36
December 29 - at 33.49
January 2       - at 33.62 (which puts the trendline above 33.55 support)

MACD also looks vulnerable here, which I'll show you next.

[Melf Elf]

JKN,

Negative divergences in a bullish stock like NVLS are common, and they aren't a reason to go shorting new highs.

However, in NVLS, we've got a TRIPLE negative divergence, and with yesterday's new high in the stock, MACD still is below the signal line, so that's a non-confirmation, as it stands.

The shorts in this stock "should be" pressured higher on the new high, and on the TRIPLE Short Squeeze, so you see why I won't like it if 33.55 support gets taken down.

It will cause me to wonder what's going on, that NVLS can't rally. 

[JKN]

Thanks Melf.   I noticed the MACD behavior as well.  I always look at volume in various time frames as a key indicator.

[David Randolph]

Thanks for your technical analysis JKN and Melf Elf, great stuff.

I agree with Melf Elf, $33.55 is key short term support on NVLS. I don't have any reason to suspect the stock will break $33.55 instead of $35 on the upside, because the trend is bullish.

I don't care much thinking about divergences on technical indicators because they are too short term oriented and I've been burned before trusting those indicators.  As I see it, no stock ever makes a meaningful move (no stock above $1 B market cap) without having some periods of weakness and technical divergences.

I'll continue holding NVLS.