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RVB's Market Musings

What began here as an avenue to interact and learn has far exceeded those goals.

If you are a prospective employer, please consider this site a place where you can see my passion for investing...

Monday, October 17, 2005

A gamble trade...

I looked at a chart of LCA Vision tonight, and saw that the stock has been headed lower for quite some time.

However, I also noticed that the stock was oversold on weekly and daily charts, and noted that price was near the 52 Week Exponential Moving Average on the weekly chart. Checking the daily chart, you'll notice a triple (maybe even quadruple) bullish divergence shown by the Force Index. This indicates that LCA is likely to see higher prices in the short term.

However, I view the trade as marginal, with a price target of only $37-$39, which is a $2-$4 gain. And, what looks like to me is trade that currently needs about a $2.50 stop, thus the reward-to-risk ratio is a mere 1 or 2 to 1. It's certainly possible that LCAV sees $42.50, which would make the trade a good one, but that's seemingly the best-case scenario. All this means that it's not a very compelling trade, especially given that the overall market is just ugly right now.


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