Thursday, February 08, 2007

My CorVel Corp. (CRVL) call

Before I get started I would like to apologize for the following self-congradulatory post. I don't have a large readership so I have to pat myself on the back every once and a while.

Perhaps some of you remember my conversation with TradingGoddess regarding CRVL after I posted my concern over many of the leaders taking a nose-dive. She wondered what my "crystal ball" had to say about CorVel's future. Here is what I said:

The strength shown by the market last week probably means that you are ok for now, but with CRVL almost 100% above the 200 dma I would probably be one of the profit takers. Also, just before the large decline, CRVL was making new highs on much weaker volume. This is always a big warning sign. The bounce on Friday
was also pretty weak and on much lower volume than the ealier decline.
(Jan 15, 2007)

TradingGoddess responded with a chart that showed increasing RSI and MACD, to which I replied:

Using RSI and MACD for market leaders can be very dangerous. They usually work best with stocks that are in consolidation patterns. My sell rules are based on William O'Neil's methods, which work very well with high-flying growth stocks (like CRVL).Look for CRVL to retest the highs and if there is a failure, then get the hell out of there fast. With only a 7.8 million float, it is easy to push around. (Jan 15, 2007)

Here is the chart as of today. I hope she got out when the highs were tested on much lighter volume.

What is interesting is that CRVL came out with earnings today and they doubled their earnings compared to earnings a year ago. This just goes to show that fundamentals mean absolutely nothing with growth stocks. It has been shown time and time again that growth stocks usually top when their fundamentals look the best.


TradingGoddess said...

Wow! I feel "famous"! LOL!

As stated, I am a long. And I rarely, if ever, hold through earnings. I usually will make mention on my blog if I intend to do so.

Congrats on your pats on the back. Well deserved. :)

Paul Stiles said...

Yup, I hate earnings reports too.

Good luck.

Lynda said...

You truly do deserve a pat on the back!