Odyssey Healthcare Shares Ailing
Shares of Odyssey Healthcare (ODSY), a company that provides hospice care, have experienced weakness during the second and third quarters. The stock price has trended lower since the beginning of the year from $14 to just under $10 in August.
Furthermore, the volume has dropped off dramatically in the last few weeks. Traders can look at this drop in volume in two different ways. The bullish camp would focus on the lack of new selling as the stock bases near lows. If there is a lack of stronger selling, then perhaps a support level has formed and the stock can trade back up to $12 or so.
The bearish camp will focus on a lack of buying at the support level, which should allow distribution pressure to push the stock below the most recent support level at $9.60.
After watching this stock trade for a few days, I have come to the conclusion that higher probability exists for the stock to trade below $9.60 as the lack of buy-side volume should allow for distribution pressure to become stronger. This type of stock price behavior is outlined in my book, Techniques of Tape Reading, as the Drop-Base-Implode setup.This setup relates to tape reading because it shows how minority behavior brings in majority behavior. In other words, institutional money -- the minority -- tends to slowly pressure the stock price in order to create a stable downtrend. Then retail traders -- the majority -- who are long the stock, all begin to sell at once, creating a sharp drop lower. The aspect of profitability exists in the "implode" portion of this setup. The first part of the formation is shown when Odyssey's stock price gapped down from $11.75 to $10.75 in late July. This is the "drop" portion. The strong reversal back to $12 failed to stabilize and the price reverted back to the $10 support area. That's what is forming the "base" portion of the setup. The final part of this trade should be the "implode" portion. When there is a combination of a strong reversal that fails to attract buyers and a base near the lows, it shows that buyers are not willing to buy the stock at the current price. They are waiting for lower prices. If shares of Odyssey close below $9.55, lower prices should occur.
| Odyssey Healthcare (ODSY) -- Daily
Update on a Current PickAmerican Campus Communities (ACC) closed below $27 without first offering an entry. This setup is no longer valid and has been taken off the watch list.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV