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Ivan Mutaftchiev
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Ivan Mutaftchiev has been managing accounts since 2002. Ivan searches the markets for profitable low-risk arbitrage opportunities such as mergers, takeovers, spinoffs and other special situations. Combining his dual experience in the investment industry and in the legal field, gives Mutaftchiev... More
  • Twin Disc (TWIN) Makes New 52-wk High, Long Term Uptrend Likely Resuming 0 comments
    Jan 25, 2011 2:10 PM | about stocks: TWIN
    Twin Disc (NASDAQ:TWIN) broke out through its recent price resistance levels at $30 on Tuesday morning on huge volume. The breakout is even more impressive, because it happened on a day when the general markets are pulling back on news of continued high unemployment and declining housing prices in the U.S. The move up follows the company's announcement yesterday in its Q2 of FY2011 report of increased sales, gross margins and profits over the same quarter of last year. TWIN is also increasing its quarterly dividend by 14% (from $.07 to $.08).

    TWIN's uptrend started in late 2010 when the price broke through the highs of a multi-week flat trading range, on October 14th. See chart below. Note the very tight range of the about one dozen days immediately before the breakout (Area A). A breakout from a tight range like this is often explosive as all the short positions in the stock were opened at nearly the same price levels, and if resistance is overcome, the shorts rush to cover at the same time. When the breakout did happen on the 14th (point B on the chart) it was not only explosive in terms of its price but was created by huge volume, indicating that the move was not just caused by a short squeeze but there were plenty of genuine buyers as well. The chart below is an equivolume chart, where each day's volume is represented by the thickness of that day's bar. Notice how wide the bar of day B (the breakout day) is, compared to any of the days preceding it.

    Since its October breakout, the price of TWIN has more than doubled going from $15 to $30 in just a few months. Therefore the consolidation witnessed in the last 2 weeks was healthy and much needed. It took the shape of an ascending triangle which is decidedly bullish for the stock. Also notice the price action on Monday (day D on the chart). TWIN opened right at the resistance level of $30, and was pushed back down ( to $28.50 and lower), as it should happen at a strong resistance level. However, at lower levels heavy buying emerged causing the price to climb back up and close not far from its opening highs. Compare this to the close of day C, which alerted traders that the uptrend was ending for the time being. The fact that so much buying occurred so close to the resistance signifies a change in attitude towards TWIN - the $30 price was no longer seen as a maximum level for its price.

    TWIN daily equivolume chart

    Tuesday's breakout happened on a day the general markets were pulling back. For that reason it is even more impressive that TWIN closed near its daily highs of $31.50. The breakout is valid and will likely lead to higher prices in the next couple of weeks and a continuation of the uptrend which started in October.


    Disclosure: I am long TWIN.

    Additional disclosure: Long TWIN as of Tuesday January 25th.
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