PEIX Update

Some members have made a killing on trading PEIX, which is what I call a Cats and Dogs trade, because it is a cheap stock it is in my mind a speculative trade and risk management should reflect that. For me that means instead of  2% of portfolio risk capital, I cut it back to 1% or less, but these stocks make up for it in their moves, like PEIX moving well over 400% since it came on our radar in October and well over a 100% gain on our last trade call. Well  told you to keep PEIX on your radar for the next pullback to enter again long (we always want to enter with the least risk and the highest probabilities).

Here's the update.

 The reason PEIX didn't pop up as an alert on my system is because I set the alert for a deeper pullback. This is my crossover screen with a custom indicator and two other indications, all 3 need to be long and in this way we avoid false/whipsaw crossover signals, PEIX gave a solid long signal in late October. The first pullback we bought was to the 10-day yellow moving average and that trade did well over 100% in about 7 days. The next pullback I was looking for and as is typical, is a slightly deeper pullback in between the yellow 10 day and blue 22 day moving averages, with each successive pullback, they tend to get deeper, yesterday PEIX pulled back to the 10-day moving average, not as far as I would like to see, which causes me some concern about buying it here. It has moved about8% on the day, but that is nothing at all for a stock like this.

 On an intraday chart, there's a pretty clear triangle that is also kind of a bull pennant, which is bullish, volume is correct and a breakout on good volume above te triangle would be bullish.... however

 The pullback has not interrupted the intraday trend on lower highs/lower lows as of yet and makes me question whether PEIX will make the next lower low, technically it is still in a downtrend and that's what bothers me. A lower low would put it closer to where I expect it to pullback to, but it's kind of a situation where you have to choose whether you want to take the chance or not.

 The daily 3C chart suggests PEIX has a lot of upside and many more chances to get long this stock, the pattern implied target is near $7 so that's a LOT of upside.

Stochastics on the other hand looks to be a bit overbought here.

 Here's the 30 min 3C hart showing the negative divergence that capped the last rally and started the pullback, there has been no positive improvement here yet, although it is a longer term chart and takes some time.

 The 10 min chart shows only a modest positive divergence, nothing huge.

 The 5 min chart shows a positive divergence EXACTLY at the pullback lows yesterday when it touched the 10-day m.a., but still, the divergence is on par with the move we have seen thus far, it isn't a broad area of accumulation that I would look for to set up the next big move.

 The 1 min hart is simply in line, I would feel better if it was positive.

If you entered PEIX here on the long side, I would reduce risk as a speculative trade and I would certainly have a trailing stop in place. I think this simple 50 bar moving average on a 10 min chart would be my choice, but if you really wanted to tighten up risk, you could use the same average on a 5 min hart, but any consolidation will knock you out of the trade.

If risk is managed effectively, I think PEIX can be tried here, it's not my ideal set up, but this stock certainly can make the risk worthwhile, but again, I would make sure that this doesn't trap you in a deeper pullback. If the stop is hit, I would take the small loss.