Stockradar: Seven (SEV)
January 28, 2010
There is really only one outcome from such a flat price action that Seven (SEV) is displaying and that is an explosion in volatility and price so let’s examine the odds of which way that will direct the price.
SEV has endured a classic period of deflated expectations brought about by the overblown response to the big recovery in its fortunes by the share price (2003 – 2007) which is quite a normal excess however this has now corrected and alas exacerbated by the bear and has thus brought SEV’s share price back from $15.00 to $5.00 - a hearty correction! Now as the market recovers SEV has so far been left behind in a strengthening market and recovering Media sector.
However I don’t buy just on that basis but it does set good foundation and heightened odds that any move from here is more likely to be up than down and this is again supported by the stock market cycles of trend, distribution, trend, and accumulation, and the fact the market trends higher over time. A sound basis for beginning my simple process of assessment of a down trodden stock (read opportunity!) and approaching SEV from the long side should we be given the right price action that supports this repetitive historical behaviour.
So now let’s look at the price since I last reviewed it on the 19/12/2009 in Stockradar’s Weekly Sector Update on the Media sector. The same holds true now as it did then as the stock is still within the trading range boundaries and all I’ve really changed on the chart since then is to add a couple of self explanatory text annotations to underline my point. There is a unique simplicity about using charts and price analysis in reducing the myriads of complex fundamentals, and SEV isn’t getting any easier, and the points of significance on the chart are remarkably simple and easily identified.
A Gann or Elliot Waver may have an opinion on when a break will occur but I’m not overly concerned about knowing when I just want to play when it does and for sure the price will tell me when the time is right to have a go.
The SEV share price is simply being strangled by the trading range boundaries of $5.00 to $7.00 with $5.00 being a high odds low point for reasons mentioned above. As to the explosion well that is likely once the upper band of this constraining trading range is violated to the upside. Down I simply don’t care as a long only trader. SEV goes on watch primarily because the odds are escalating of a break because SEV is now trading in the upper echelons of this trading range and the period in the latter part of last year saw the volume (demand) expanding holding the price up a level from support at $5.00 to support at $6.00 – constructive and positive.
This doesn’t mean it’s going to break but it is solid evidence of demand as the potential trade looks more interesting and I know then there is a very high odds chance that should the stubborn selling be taken out at $7.00 then the buyers can easily swamp the sellers and in their absence or retreat and run the price higher. A common price affliction! I look for volume expansion to validate a break with level up around $9.00 a likely target for a market imbalance of buyers and sellers to take the price too initially. This is arrived at by focusing on the most recent overhead selling level and by extrapolating up the height of the trading range ($7.00-$5.00=$2.00) from the potential break point at $7.00.
A breakout sees SEV escape free from a long term accumulation pattern and when this happens after a downtrend the next phase is to trend higher and as the SEV business seems to be running hot and Stokes who always keeps us guessing is behind its fortunes then it seems too good an opportunity to ignore as the stars align and the odds skyrocket to just where I want them, firmly in my corner. Until $7.00 breaks then................. “As a weekly long only equity trader my foremost rule is to protect and preserve and this WILL happen if I follow the rules and that’s why I don’t fear losses.”
– Richard Lie
SEV has endured a classic period of deflated expectations brought about by the overblown response to the big recovery in its fortunes by the share price (2003 – 2007) which is quite a normal excess however this has now corrected and alas exacerbated by the bear and has thus brought SEV’s share price back from $15.00 to $5.00 - a hearty correction! Now as the market recovers SEV has so far been left behind in a strengthening market and recovering Media sector.
However I don’t buy just on that basis but it does set good foundation and heightened odds that any move from here is more likely to be up than down and this is again supported by the stock market cycles of trend, distribution, trend, and accumulation, and the fact the market trends higher over time. A sound basis for beginning my simple process of assessment of a down trodden stock (read opportunity!) and approaching SEV from the long side should we be given the right price action that supports this repetitive historical behaviour.
So now let’s look at the price since I last reviewed it on the 19/12/2009 in Stockradar’s Weekly Sector Update on the Media sector. The same holds true now as it did then as the stock is still within the trading range boundaries and all I’ve really changed on the chart since then is to add a couple of self explanatory text annotations to underline my point. There is a unique simplicity about using charts and price analysis in reducing the myriads of complex fundamentals, and SEV isn’t getting any easier, and the points of significance on the chart are remarkably simple and easily identified.
A Gann or Elliot Waver may have an opinion on when a break will occur but I’m not overly concerned about knowing when I just want to play when it does and for sure the price will tell me when the time is right to have a go.
The SEV share price is simply being strangled by the trading range boundaries of $5.00 to $7.00 with $5.00 being a high odds low point for reasons mentioned above. As to the explosion well that is likely once the upper band of this constraining trading range is violated to the upside. Down I simply don’t care as a long only trader. SEV goes on watch primarily because the odds are escalating of a break because SEV is now trading in the upper echelons of this trading range and the period in the latter part of last year saw the volume (demand) expanding holding the price up a level from support at $5.00 to support at $6.00 – constructive and positive.
This doesn’t mean it’s going to break but it is solid evidence of demand as the potential trade looks more interesting and I know then there is a very high odds chance that should the stubborn selling be taken out at $7.00 then the buyers can easily swamp the sellers and in their absence or retreat and run the price higher. A common price affliction! I look for volume expansion to validate a break with level up around $9.00 a likely target for a market imbalance of buyers and sellers to take the price too initially. This is arrived at by focusing on the most recent overhead selling level and by extrapolating up the height of the trading range ($7.00-$5.00=$2.00) from the potential break point at $7.00.
A breakout sees SEV escape free from a long term accumulation pattern and when this happens after a downtrend the next phase is to trend higher and as the SEV business seems to be running hot and Stokes who always keeps us guessing is behind its fortunes then it seems too good an opportunity to ignore as the stars align and the odds skyrocket to just where I want them, firmly in my corner. Until $7.00 breaks then................. “As a weekly long only equity trader my foremost rule is to protect and preserve and this WILL happen if I follow the rules and that’s why I don’t fear losses.”
– Richard Lie
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