Rochester's Technicals

It is my opinion that someone is acquiring ROCM quietly. I have no real data to back that up, but the stock is forming a very good bottom and is trading very tightly in its base. That's usually a sign of institutional investors trying to buy without pushing the price too high.

I have been standing by for a week now expecting Rochester Medical to leave its base from the Bull Flag it has formed. A flag is described as a short-term continuation pattern that mark a small consolidation before the previous move resumes. Flags are preceded by a sharp advance or decline with heavy volume and most often mark a mid-point of a trend.

On September 20th, ROCM spiked on heavy accumulation forming the "flagpole" of the move. It hit a higher high and a higher low the following day (also on above average volume) before settling into the current consolidation period. This period is reflected with lower volume and a tight trading range that get tighter.

Since then (and typical of a classic Bull Flag), the stock has moved into a small triangle pattern that slopes against the previous trend. Since the previous move was up, the flag slopes down. A flag is a short term pattern that last no more than 1 to 12 weeks and the tightness of the pattern is why I expected a move last week. It looked ready on Thursday and Friday, but I think that the overall market tape formed some pricing pressure.

When the stock leaves this pattern, I expect good volume (it did start to pick up on Friday) and the accumulation to continue. Chartists will tell you to judge the pattern by the flagpole to gauge the height of the next move up. A classic flag suggests that the move up with be $3.50 (the length of the flagpole) from the top of the flagpole. This places the possibility that we may see $22.50 in the near future. Whether that happens or not is yet to be seen.

I am just applying theory to a real life moment and hoping for the best. None of this chart stuff takes away from my belief that ROCM has something special fundamentally.

Here is the linkable version of the chart. I felt that seeing the chart in full view (without shrinking it to fit the page) does the pattern more justice.

http://stockcharts.com/h-sc/ui?s=ROCM&p=D&b=5&g=1&id=p94458160903&a=104211353