NEW YORK (TheStreet) -- The weekly chart for drugstore chain Rite Aid (RAD) shows how a stock can flounder below $10 a share for years after a stock-specific parabolic bubble pops. Now, the stock is knocking on the door of a new multiyear high before reporting quarterly results pre-market on Thursday.
Rite Aid has been a turnaround story for years after the stock peaked above $50 a share in January 1999. The stock traded as low as 20 cents a share in February 2009. The stock gained upward momentum in December 2012 and shares, at around $9, are trading near a multiyear high going into earnings. Since the stock remains below $10 a share, Rite Aid is blocked from being a holding in many equity mutual funds.
Analysts expect Rite Aid to earn 2 cents share and the company has a three-quarter winning streak on the line. Some say that the stock will benefit from a short squeeze if the company beats estimates and offers solid guidance. This is a possibility given an industry trend where major drug store chains increase their focus to providing healthcare services.
Let's look at a monthly chart for Rite Aid to show the parabolic bubble that popped beginning in January 1999.
Courtesy of MetaStock Xenith
Note how the parabolic bubble inflated from mid-1996 into Jan-1999. Note that all-time high was $51.12 and that the stock traded as low as 20 cents a share in early-2009.