If there was any lingering doubt that Wave Systems Corp. (NASDAQ:WAVX) was in the early stages of a rebound, today's 11% pop should wipe those doubts away. This little technology company has lodged itself firmly into a bullish trend today, after hammering out a turnaround effort for the past four months. Translation: WAVX has become a convincing buy.
If the name rings a bell, that may be because WAVX was named as a budding breakout idea back in early March, and then again in early May. In March, it was pointed out that Wave Systems was mounting an attack on a key resistance line at $1.15. Though it didn't hurdle that line until the middle of April (and then only with an aggravating bullish gap), it did make its way above that line.
Just for the sake of safety, a wise investor would have waited for Wave Systems Corp. to either close that gap or fall back, regroup, and then rekindle the uptrend. Although the stock didn't need to close the gap, WAVX did peel back and regroup, and began to move higher again by early May... the last time it was dissected on May 5th. Since then, not only have shares continued to advance, they've visibly accelerated. The daily chart below tells the whole tale pretty well.
The question from here is, just how for could Wave Systems Corp. before hitting a major wall?
As was the case earlier in the month, there's a huge line in the sand at $2.00. That's where WAVX topped out last month following the gap, and it's also where the stock hit a ceiling a couple of times in early 2013. Unlike then, however, this time the stock has some healthy bullish momentum behind it. Translation: While the $2.00 mark is a good checkpoint target, traders may want to be willing to give it a chance to break past $2.00 and then make a run for a former floor at $2.40... a floor from late 2012 and early 2013. If that level doesn't prove to be a line in the sand, then Wave Systems could - and we stress could - make a run for the major ceiling at $4.00. The weekly chart illustrates all of these potential resistance levels.
Whatever's in the cards, one thing's for sure now - WAVX is on the move, and could keep going for a while. The tide's strong enough to take a swing on now, although newcomers may want to wait at least a day or two to let today's overbought condition burn off just a little. The stock should regroup pretty quickly, though, and resume the uptrend that got started earlier in May. The stock shouldn't slide under $1.45 to restart the rally, and if it does, it may then be best to wait for a test of the 20-day moving average line at $1.30 before wading in.
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