EBIX spiked on what was pressure put on by a massive amount of buy-ins occurring. The stock is extremely difficult to borrow, as there are no shares available across multiple brokerage houses that I have checked. The pressure that is being put on the stock is 100% artificial and is solely the result of the buy-ins that began occurring more than a week ago and seem to have picked up steam on Friday.
Also, on a technical basis the stock was “pinching” a bit and was set for a range expansion either higher or lower. Due to the buyins, the move was made higher, with technical triggers adding to the upside buying pressure.
The software sector is extremely cyclical in nature, with each individual name within the sector experiencing long bouts of elation (bullish), depression (bearish) and indifference (sideways). EBIX has long passed its elation stage and is well into its depression stage. Typically, the bout of depression will not end until there is a selling climax of some sort, which is followed by a long period of indifference. EBIX has not experienced that selling climax, as of yet, and is poised to move lower once this buying pressure subsides.
Let’s take a look at a 3 month chart and a longer term chart to get an idea of what we can expect:
*Click on the chart below to enlarge
EBIX should be sold short as it moves into an attractive resistance and risk/reward point in the 18-19 range. It may move there under the momentum of forced buy-ins and technical buying pressure. Don’t be fooled, however, the move is artificial in nature and should be treated as such.
Dr. Kellegro…Day 43.
Disclosure: Short EBIX