China Agritech Inc at a Moment of Truth

China Agritech Inc. is right now from a technical analysis standpoint at a moment of truth in my opinion.  CAGC in the past has consistently held the support of its 50 day moving average and also the 42 RSI level (Relative Strength Index).

The 42 RSI level has repeatedly served as a base for this stock going all the way back to the start of 2009.  This means that we should expect the 42 RSI level to hold for China Agritech Inc. to keep its longer term bull run intact. 

If the 42 RSI level does not hold then what it says to me is that the longer term ‘easy’ uptrend is broken and CAGC may go into a more complex longer duration correction.

In the short term the stock is suffering from a small descending triangle formation.  These formations can lead to a break down in price but they also have a habit of failing quite often as well.  So if we do get a breakdown out of the small triangle and move below the 42 RSI level then it would seem more corrective action is on its way.

Previously I had drawn a large broadening wedge type pattern on CAGC and if the pattern is accurate then it suggests there is at least the possibility of CAGC going back down to the bottom of the wedge eventually near the 17 level.  That may seem like an unusually large move, but this stock is famous for swinging high but just as easily swinging low when money gets scared.  The float is small and the volatility is high.

Anyway here is the chart I have for CAGC which shows the broadening wedge as well as the critical 42 RSI level indicated by the solid red horizontal line in the indicator portion of the chart.

cagc20100412

The longer term semi log chart of CAGC suggests to me that even if CAGC does break down from here, the longer term weekly uptrend is still intact.  However I see that the 20 level on CAGC is absolutely crucial to hold on the longer term weekly semi log chart.  Breaking significantly under 20 would be major trouble in paradise for this stock.

So the levels are known and the critical areas defined. 

How’s that for peace of mind ? 🙂

Posted in China Stocks, Online Trading
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