Odyssey Healthcare Shares Ailing

Shares of Odyssey Healthcare (ODSY Quote), 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. ...