The Female Health Company just hit a short term trading level we set last September 2009. When we first entered the trade our sell stop level was triggered quickly in a few days before FHCO made a sharp move lower, and ironically bottomed. It has since been trading with a lot of volatility.
It’s longer term direction is hard to discern as the stock has relatively short trading time frame over its entire trading history. However, to recap what has happened and what possibilities to look for with FHCO, we can analyze the daily trading time frame chart below. Two possibilities may exist.
September 24, 2009 FHCO traded to a low of 4.48 then to 5.16 before retesting to 4.50. This wave set the table for projecting an internal wave 3, which underperformed a little only reaching 5.65. What happened next appears to be a double bottom by definition, as trading continued lower exactly to 4.48. This trading action did not conform to the prior internal wave sequence though. Further, the MACD for this daily trading time frame shows that this push lower on December 24, 2009 should have made a new wave 5 low. The weekly chart shows this could be just a wave 3 low in which wave 5 would reach lower than the 4.48 low.
Explanation of this scenario is that the huge double bottom is not the start of wave 1 but the beginning of wave B of a simple ABC zig zag correction. If this scenario is the case, the prior downtrend from 7.79 to 4.48 will correct to the upside reaching towards 6.53 to 7.00, before the C wave begins and takes out the lows of 4.48.
Because of the short history of the stock it is difficult to project the low that would occur if a wave C were to form. The only way to project this low is to wait until the wave 4 correction higher has completed. This has not happened yet, but should soon as it trades higher to the levels noted and corrects. The ambiguity of waves within the prior trading range could justly describe the B wave. Only with the final C wave can a 5 wave sequence be projected in price to complete a downtrend.
The alternative is that this is in fact a double bottom where the 4.48 trading low to 5.65- before the retest- will serve as the daily wave 1. In this case the targeted high of 7.00 could just be a wave 3 of a full five wave parent wave 1 weekly. If this plays out then FHCO will not trade below 5.65 after it finishes this uptrend to 6.50 – 7.00. Instead, after a wave 4 correction FHCO would trade higher to 8.71.
This 5.65 price level could be the swing point to higher highs or lower lows.
