Covisint Corp. provides an open cloud platform in both the United States and internationally. Jumping right into the balance, sheet the fundamentals look solid. The company has maintained a cash balance of roughly $50 million for each of the past 3 years. The current assets to current liabilities ratio is 2.1, so liquidity shouldn’t be a concern. The company has reported yearly losses, and the past two years have seen drastic losses, and the stock price has been punished accordingly from $13 in 2014 to $3.27 as of today’s close. The fundamentals justify a swing trade position. COSV has been on a strong run up after bottoming at $1.81 in early May. Since then the stock price has nearly doubled, but more gains appear to be on the way. There is a case to be made that on the weekly chart, an inverse head and shoulders pattern formed from November of 2014 through a few days ago with the breakout on 06/26. Even after the huge market drop yesterday, COSV put in a small gain on the day. This is where things get interesting. The price target of the pattern measures to about $4 per share. There is also a huge gap to fill in the area above $3.29 all the way to the $4 level. There is a bit of resistance at the $4 level, so that would be a great place to take profits. To clarify, a move above $3.29 should cause prices to continue higher, and likely fill a gap that occurred in early October 2014. The best strategy here would be to buy on a confirmed move above $3.29, and place a stop loss just below $3.10. Considering there is a potential $.70 gain on the upside, a stop at $3.09 would give at least a 3:1 risk:reward ratio.
