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STOCHASTICS


Can CRY.TO Sustain Its New High?

02/22/07 01:49:40 PM
by Chaitali Mohile

Crypotologic, Inc., made a new high. But can it maintain it?

Security:   CRY.TO
Position:   N/A

The stochastic (14,3,3) of Cryptologic, Inc. (CRY.TO), has turned highly overbought on daily and weekly charts (Figures 1 and 2). That gives a cautious signal for traders to book profits on the stocks. On Figure 1, stochastic was near 83 levels, which indicates overbought levels and shows the possibility of some decline in stock. The target on a flag & pennants breakout at $30 is $34. CRY.TO has already made a high of 33.60. In Figure 1, traders can see the critical move of stochastic in 70-80 level, forming flag & pennants as prices consolidate.

Combining the overbought level of stochastic with the relative strength index (RSI) (14) at 78 also directs toward the decline in stock price. In Figure 1, the RSI is also highly overbought at 78, indicating some decline in an upward rally. Thus, both indicators emphasize a downward move of the stock. And often in such good conditions, the new high comes with danger.

FIGURE 1: CRY.TO, DAILY. An overbought stochastic indicates some correction.
Graphic provided by: StockCharts.com.
 
Let's see if Figure 2 also gives the same indication of a possible dip in Cryptologic, Inc. Figure 2 shows that the price moved above its previous high and made a fresh level of 33.60. While the stock traveled from $19 to $33.90, the stochastic gave a buying opportunity at the oversold level below 20. As stochastic turned oversold, the volume also suddenly increased. But gradually, the volume is seen reduced till the RSI (14) was below 50. This shows the importance of oscillators' levels. But at current levels, the stochastic is highly overbought at 93, indicating the downfall. The RSI is marginally overbought, even after making a new high, indicating poor strength in the rally. Again, though the price made a new high, the volume hasn't increased satisfactorily. That marks to failure of a fresh high. So I would suggest traders take profits at around 33.60 as this stock is likely to dip soon.

With an overbought stochastic, the stock is likely to dip more. The newly made high is in danger and traders therefore should look to take profits on this stock.



FIGURE 2: CRY.TO, WEEKLY. CryptoLogic is under previous high resistance.
Graphic provided by: StockCharts.com.
 



Chaitali Mohile

Active trader in the Indian stock markets since 2003 and a full-time writer. Trading is largely based upon technical analysis.

Company: Independent
Address: C1/3 Parth Indraprasth Towers. Vastrapur
Ahmedabad, Guj 380015
E-mail address: chaitalimohile@yahoo.co.in

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Date: 02/22/07Rank: 4Comment: 
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