There's little doubt that merely suggesting it will enflame some traders, but truth is truth - Ku6 Media Co Ltd (NASDAQ:KUTV) is overbought and ripe for a pullback, soon. Anyone worried about not having a place to park those proceeds, however, need not fret. There's a brand new breakout finally underway that still has plenty of proverbial meat on the bone... Star Scientific, Inc. (NASDAQ:STSI), which just blasted past a key resistance line around $2.11 today. In so doing, it became free to rally without restraint.
KUTV shares are up 96% since the end of September, and have rallied 56% over the past two days alone. The prod for the big move? That's just it - there wasn't one. Ku6 Media Co Ltd has captured the hearts and minds of enough traders to bid it up in an unusually large way over the past couple of weeks.
Granted, sometimes a stock's rally becomes to big and well-publicized that the rally itself becomes the stock's story (as has been the case with Ku6 Media of late), but a red-hot runup isn't a long-lived reason to buy a stock. Eventually, the euphoria fades, and shares reverse course just as quickly. The fact that we've now seen two very high-volume, big-gain days in a row with this stock may well imply all the buyers who wanted in are pretty much in, leaving nobody behind but the sellers (active or potential). Point being, there's far more risk than reward with KUTV at its current price and in its current condition.
Instead, any so-far-unrealized gains from Ku6 Media Co Ltd may be better allocated to Star Scientific.
If the name rings a bell, it may be because yours truly pointed out STSI was approaching a breakout effort back on October 8th. In all fairness, I said the same thing back in mid-August when Star Scientific, Inc. was first knocking on the door of - and had even surpassed - a horizontal ceiling at $2.11. The effort sputtered out the very next day, and many traders mentally shelved the stock and the idea by mid-September. Great trading ideas and setups rarely go away though ... they just bide their time. Its time appears to have come today, with a decisive break above that ceiling, on a huge volume surge.
And what prompted the rally from STSI? Like the Ku6 Media rally, nothing ... at least nothing from the company, and really nothing from the market simply about Star Scientific. The majority of traders just decided today was the day to unleash all the pent-up potential here, and off she went. For the same reason the KUTV rally couldn't last indefinitely based on nothing but a whim, STSI can't keep going forever either. But, there's a lot of room left to run - this is just the beginning of a trade-worthy move for the diet supplement and smoking-cessation outfit.
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