Subscriber request; SUF analysis
Looking at SUF again, of course what else, I went back and looked at some charts of XMSR and TASR. I noticed how those stocks only had very little one or two day "cooling off" periods like we have seen with SUF. Can you make a connection with charts like that. I know this thing is overbought and needs to come back in, but maybe all we get are these little one day rests?
The problem with stocks in these excited states is greed takes over from rational investing (or trading); investors create support and resistance; traders add volatility. For investors the question is whether this company is fairly valued at almost 4 times the price it was in September 2005? How will the UAE deal turn a company which has never turned a profit into profitability? If the average competitor's P/E is 21 (according to Yahoo) then SUF would need to earn around $0.93 a share to warrant current prices on a fundamental basis, or bank around $52 million in net income per year with SUF's 56.8 million shares outstanding ($56 million from the UAE deal alone to negate the $4m losses the company accrues on an annual basis). Now these are crude calcuations and I would double check the math but the fundamental merit doesn't look good here.
Technically, we have an unsustainable run; lots of gaps and declining volume. This is a pure traders momentum run; investors were interested around $10 - not $20. Can this climb to $25, or $30? Sure, but price will collapse as quickly as it rose and likely won't find some stability (and basing action) until we get back to $10. In 2004 TASR topped at $32, 2 weeks after it tested $20; SUF probably hasn't got much juice left in the tank but if you trail stops there could be another 50% gain to be made here.
TASR's run
XMSR is a little different and after basing in the $20-30 range it managed a run to $40. Note the rounded numbers for support and resistance - these are trader targets.
XMSR
How can we apply this to SUF; if price breaks $20, then $20 should be support on any subsequent correction as more momentum player step in. A SUF move to $30 looks good if we use TASR and XMSR as our example. Beyond that will depend on how much support the stock finds at $25, $20, $15, and $10 on its next correction. Going on my fundamental analysis and the volume traded around $10 I would suspect $10 is where we will find investors taking a nibble; by then the company will have probably announced some form of guidance from its UAE deal.
