Diversa Demonstrates Failed Rally

Apr.17.07 | About: Diversa Corp. (DVSA)

I sold my holdings in Diversa (DVSA) at $8.08, for an 11% gain. I would have liked to hold longer, but I grow weary when a rebounding stock like DVSA shows weakness or demonstrates a failed rally, as DVSA did yesterday.

Over the weekend the Associated Press printed an article about several bioteches’ ambitions to ease our reliance on corn as the primary feedstock for ethanol. The article mentioned DVSA as well as the improving economics of enzymes which; "Have fallen from about $5 a gallon to less than 20 cents a gallon. Analysts said once enzyme prices gets below a dime, cellulosic ethanol will become affordable."

Initially, Diversa responded well as the stock gapped up to a high of $8.60 in early trading, but slowly it drifted back to support in the low 8's. This could simply be an instance of a whipsaw, but I view it as a failed breakout.