Monday, July 07, 2008

Perspective

HYGS has been a big winner since written up here at about $0.90 on June 19th. In the past few days HYGS has given back part of that run. Just how much has it given back and should we be concerned?

On this chart, I've placed two key indicators, a Fibonacci retracement tool and an 8-day exponential moving average. Both show HYGS at a natural pull-back level and ready for another move up.

Note on the Fibonacci levels that HYGS came back to the 38.2% level. I learned this technique from Robert Prechter as well as a decade long use of Advanced GET, probably the best trading software I've ever used. This technique suggests that any tradable security will often retrace large moves by an amount equal to a major fibonacci level, 38%, 50% or 62%. The stronger the move, the smaller the retracement levels. HYGS has reached the smallest fib level, it could fall to one of the lower levels, but it has already achieved it's minimum expected dip.

Looking at the 8-day exponential moving average, just look at how the stock hugged that average all the way up on the chart, until finally moving way above it in it's spike to $2.40. Again, HYGS has fallen to a natural support level, the moving average, from where another leg up can begin.

In summary, HYGS has fallen hard from $2.40 to $1.65 but the decline is within normal expectations for periodic retracements. It could fall lower and still be bullish, but it has already fallen enough to fuel another advance.

A

5 comments:

Anonymous said...

Thank you for the update. I got in before it started to pull back and now I was unsure what to do. Your post gave me a clearer picture of what is going on as well as a better understanding of how to look at pull backs.

-- Matthew

Anar said...

Great post.

What is your take on the FSYS pullback?

-AM

Anonymous said...

HYGS has pulled back to below the 50% Fib level. At what point would you be a buyer if at all?

Allan said...

Yes, anywhere between 1.25 and 1.45 (the 50% to 62% fibonacci retracement levels) would be a good entry for anyone bullish on this stock.

Anonymous said...

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