Technical Analysis (TA) is useful for many things but it is very difficult to do on low priced OTC stocks. The reason for this is that a stock's current price is reflection of the participation of the buyers and sellers at the CURRENT time, as well as the psychology of the current stock owners (holders).
Just about all TA results from the study of price and volume. In a very liquid stock there are a lot of participants so the collective psychology of the holders, plus the actions of the current buyers and sellers is blended together to create a level of inertia in the stock price. To use the inertia analogy, things in motion (trends) tend to stay in motion until a significant change in the psychology of the holders occurs changing the price and volume patterns by adding their participation. ("They missed earnings big time" or "Their patent claim was rejected so they will have to pay large royalities to the patent holder," etc.) In order to create a significant change in the psychology of a Fidelity mutual fund manager or a Blackrock ETF manager - those who can change those price and volume patterns - it takes a lot to do so given the amount of money in play.
For illiquid stocks (yes, NNVC does trade 1,000,000 shares a day sometimes but 1 million shares * $2 means that $2 million can buy all the shares for the day on a "big" day. NNVC is illiquid at this point), that collective psychology is much more easily influenced and if you have enough money, then you can manipulate the shares as well, looking to exploit the current holders psychology.
Excepting last Thursday's weirdness, stocks like GE or PG or AA don't plunge 30% in a day and close near where it started the day like NNVC did on 4/28. The psychology of the big boys is to "buy value" if they bought AA at $13, then it is a great deal at $11. Right now, we don't have big boys in this thing. So, our psychology is in play here and judging by the various posts on the board it is somewhat volatile. Biotechs are volatile, small cap OTC biotechs are extremely volatile and do not follow the percentages of various TA studies very well. Not to say they are useless but for stocks such as these, most TA other than the basics (trendlines, big moving averages, etc.) don't work very well.
In my opinion, it is folly to try to trade this thing, especially using TA as your guide. If you want to use TA to trade, go trade AA, CLF, AAPL, etc. You will have much more luck in that arena than here. If, instead, you want to build wealth, then a stock like this is what you want to buy, and add to as its price dips (provided that dip is not based on a failed study or something material).
P.S. For those interested in TA, make sure to check out www.thepatternsite.com - Tom backs up his TA with real numbers and extensive study, great stuff!
