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Vringo (VRNG): A Perfect Technical Retracement
A Perfect Retracement
This chart is about as pretty as it gets.
Until otherwise notified, I'm just following two small stocks- The import from Down Under- Barfresh (OTC: BRFH), and the David vs Goliath story on Vringo (AMEX: VRNG).
David began his fight with Goliath Google (NASDAQ: GOOG) this week with the trial commencing on Tuesday. It is well into the testimony phase.
Early reports suggest the Vringo attorneys did a good job in the opening- boiling the issues down to simple English, while the Google guys were far more technical- trying to confuse the jury.
The trial is well into the testimony phase already, and reports also suggest witnesses for Vringo who were involved with the development of the technology way back in the Lycos days have been very credible.
More importantly, as I pointed out in the last edition on this company, the stock fell back this week as the hot money that was hoping for a settlement before trial came out of the stock.
Recall the company recently raised $45 million by selling 10.35 million shares at $4.35. The stock was just under $4 at Friday's close, so you can now pick it up for less than the sophisticated funds who put in $45 million hard cash.
Moreover, technically this chart sets up perfectly for a rebound:
The giant four day surge you see in October was the result of VRNG getting favorable rulings on several motions related to the legal process.
The market was hoping for a $100 million plus settlement at that time. The trial started- so no settlement. With the trial underway, the market will try to guess the outcome as it moves through its various phases.
Even some of the most skeptical followers are starting to believe VRNG could have a big pay day here.
Technically, the stock completed a nearly perfect 61.8% retracement of the big move up in October. The perfect 61.8% Fibonacci Retracement was at $3.89- which is almost exactly where the stock traded to.
Another feature I like about this chart- there was much greater volume taking it up than there has been taking it down. It suggests there's a short term buyers strike, but a lot of current shareholders are choosing to wait it out. Supply will be harder to come by when buyers come back in.
At the $4 level, you can own it lower than the guys who just invested $45 million. In a jury trial there's no way to predict the outcome with certainty, but a $45 million bet is not made without the benefit of a little homework.
If the trial goes against VRNG, this stock will collapse instantly- you won't have time to get out with a minimal loss. That eventuality will be a few weeks out.
At the $4 level, you can definitely take a shot for nothing more than a trade if you are inclined. Since it's completed a perfect 61.8% retracement, it should bounce now. If it wants to go lower, it's likely to go a lot lower, so you can put in tight stop.
More likely, I'll bet the stock is back to the $4.25 to $4.50 range in a few trading days, poised for another massive surge if the market believes the trial is going well.
If you like the story and want to take a risk- $4 is your number. I've been calling this one right for 18 months starting at $1.25. Hopefully, that trend will continue
