Small Cap Network's  Instablog

Small Cap Network
Send Message
Small Stocks. Big Returns. The SmallCap Network is one of the web's leading small cap stock trading communities. While large caps tend to receive the majority of media attention, small and micro cap stocks as well as penny stocks can often offer the most potential for investment gains. The... More
My company:
SmallCap Network
My blog:
SmallCap Network
  • Look Out Below: WAVE, ADTN, COMS 0 comments
    Aug 4, 2009 11:38 AM | about stocks: COMS, ADTN

    Traders may want to avoid Nextwave Wireless, ADTRAN, and 3Com for a while.

    Though the market's been rallying for several weeks now, some of its leading stocks may have sprinted a little too quickly... rather than pacing themselves. Three of the market's most over-extended charts are those of Nextwave Wireless Inc. (OTC:WAVE), ADTRAN Inc. (NASDAQ:ADTN), and 3Com Corporation (COMS). Given how overbought each one is - paired with a recent stumble on their charts - all three may be prime 'sell' candidates if not outright shorting/bearish ideas. Here's a detailed review.

    Things were going great for shareholders of Nextwave Wireless Inc. (WAVE). In March, the stock jumped back above its 20 day moving average line, and managed to ride that train all the way from 13 cents to 50 cents. A couple of volatility blips popped up, but it was still a solid gain.

    The bearish move over the last few days, however, can't be chalked up to a volatility blip... quite the opposite actually. WAVE calmly rolled back under its 20 day line, and has been hitting resistance there ever since.

    Volume has been light, but the damage may have already been done. A return to 10 cents isn't completely out of the question, though we'd advise using a tight trailing stop for any trades.

    ADTRAN Inc.
    (ADTN) popped up on our bearish radar when running a routine scan for overbought stocks (long-term, weekly charts) that are starting to crumble. ADTN certainly fits that bill, but the sell signal has been augmented by another coincidental pattern that says ADTRAN ... a major resistance line.

    ADTRAN shares have been plagued by this ceiling line (blue) since 2003, and it's been quite reliable as a cue. In fact, this same bearish trading system caught the 2005/2006 pullback, and scored a 14% gain with it.


    As for a target price, if the pattern holds up, ADTRAN shares could fall back to anywhere between $10.00 and $16.00. For that reason, this may be an idea that's better monitored than pegged to fall a certain distance.


    3Com Corporation (COMS) looks a lot like Nextwave, except more exaggerated. COMS made huge gains between March and June, but the weight of those gains proved to be too much over the last eight weeks. The stock fell - sharply - under its 20 day moving average line in June, and have been falling ever since.

    The bulls made one last revival effort last week, but COMS started to fall again as soon as the ceiling at the 20 day line was met. If $3.60 fails as support (the final final straw), 3Com Corporation shares may not find solid ground again until the low $2.00 area. That's a stretch goal to be sure, but a possibility all the same.

    Though none of these stocks are an official SCN short/bearish pick today, any of them could be in the near future. To be notified if and when we issue a trading alert on one of these three or any other stocks, sign up for our free newsletter today.
    Stocks: COMS, ADTN
Back To Small Cap Network's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers


More »
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.