Tuesday, July 24, 2007

SWC Capitulated Today Rally Tomorrow?

I think SWC probably capitulated today with the 8.25% drop. In the past 3 days SWC had dropped 20%, from $12.36 to $10.01. If such a rapid drop is not a capitulation, I don't know what is. Capitulation many times indicate the end of a correct and the start of a new rally phase. So let's watch SWC carefully tomorrow.

Previously I discussed a possible big player trapped in too big a short position to unwind. I also discussed that the SWC earning for this quarter (Q2) may actually be very good, due to the dramatically increased metal recycling, and significant precious metal price increase, despite of the slight production shortfall from Q1. There is no rationality that SWC should fall so quick so hard.

My speculation is the trapped short may very well be aware that the SWC quarterly earning has got to be a good one. So they are desperate and they must try very hard to trigger a panic selling from the longs, so that they can unwind their short positions for a profit, before the good earnings will be announced in early August. So far, despite of the capitulation of SWC price hammer down, the volume really is not that impressive. So the trapped short has failed it ins objective of unwinding it own short positions.

I think, since the capitulation has occured, we probably see some nice reversal tomorrow and a big rally coming, leading to the quarterly earnings announcement.

I did not sell any of my SWC positions, and loaded up quite some call options about one hour before market close today.


Eric J. Fox said...

Looks like the stock had a good bounce.

Anonymous said...

JJ likes his little boys young and fresh!


Nice way of putting things.