The hot and cold cycle for Zalicus Inc. (NASDAQ:ZLCS) continues to repeat itself. The fourth such turn of that wheel looks like it's getting ready to begin, and if this is one anything like the last three, ZLCS is due for a rally of anywhere between 25% to 50%. Traders who hop on that wave shouldn't tarry, however, because if the budding rally is anything like the last three, it's still only going to lead to a pullback about half the size of the gain. Still, a sizeable double-digit gain isn't bad for a few days' worth of work.
If the name or ticker rings a bell, it might be because yours truly has been following all the twists and turns of the ZLCS saga since August 30th. That's the day it was deemed a buy, though that call was reversed - and rightfully so - on September 4th, after a 31% runup but before an 11% dip. As was also noted on the 4th of September, however, Zalicus Inc. would be a buy again once a pullback was and key support lines were proven to be floors again. That happened all throughout September, and sure enough, shares were catapulted from $4.58 on the 26th to a high of $8.28 on October 2nd. Though the warning from October 1st may have been a day early, it wasn't an ill-advised recommendation. ZLCS only traded briefly higher that next day, and began the 28% pullback that looked inevitable (to me) the day before.
I don't reprise the ongoing saga of Zalicus to pat myself on the back, however. Believe me, every time I bring it up and have to post something bearish or pessimistic on the stock, I catch an inordinate amount of flack for doing so ... even if the call is just a short-term one. I'm reprising the story now just to say, the pullback I was worried about back on the 1st has run its course, and ZLCS looks like a buy again.
The chart tells the story. Friday's dip was something of a blowout - a mini capitulation characterized by high volume and a big move lower. That in itself implies something of a flushoout of all the weak owners and would-be profit takers. More encouraging was how even before Friday's session was over, Zalicus Inc. started to recover, closing around the middle of that day's trading range.
The clincher came today, however, with the simple fact that ZLCS followed through on Friday's upside move. Things started weakly, but the bulls quickly dug back in again to hammer out a gain. Though volume is light so far, the reversal and follow-through speaks volumes.
Assuming this turnaround is like the last few, Zalicus could make its way all the way to just under $9.00 before hitting a headwind. And yes, I'll be suggesting selling it again there. Nothing personal - just (trading) business. Just keep in mind the last three calls I made were all on target.
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