A week and a half ago I posted a bullish - though condition - commentary on Star Scientific, Inc. (NASDAQ:STSI). Truth be told, I expected that potential bullishness to be unleashed a few days later. When it didn't unfurl, frankly, I started to forget about STSI. Fortunately I didn't completely put the stock on the shelf, because it finally formed that technical catalyst yesterday, and followed-through today.
For those who caught my first look at STSI, you may recall that the big catalyst was the horizontal ceiling at $2.11. That was where the stock peaked in mid-July, and that's also where it was peaking on the same day I penned my prior bullish comments. Sure enough, Star Scientific shares peeled back from there later in the same day. The stock tested $2.11 again on the 9th, and once again peeled back. By the time we got that third test/failure cycle logged, however, it was clear something was changing... for the better.
That 'better' finally got traction on Tuesday, with Star Scientific, Inc. breaking above - and closing above - $2.11. The fact that the volume behind the move was so strong confirms the necessary participation and bullish interest is in place. And for those doubters, the stock's holding the line above that former ceiling today.
Point being, all the clues point to STSI being in a full-blown breakout mode, after brewing it up for more than three weeks.
As for the catalyst, well, that's just it - there wasn't one. This all "just happened" organically. That's not a bad thing, however. In fact, it's a very good thing in that it implies the market is finding the stock to be a bullish prospect on its own rather than requiring good news to induce buying. That kind of bullishness tends to grow rather than wane, which means the rally may still have some acceleration in store before reaching full speed.
The potential upside target here is, believe it or not, around $5.00. That's where STSI topped in 2012 and 2011. Just keep a tight leash on it, because the underlying fundamentals don't support that valuation. This trade is mostly a speculation about how traders are changing their opinion on Star Scientific, and what that majority opinion will be a few months from now.
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