Kingtone Wirelessinfo Solution (NASDAQ:KONE)
Kingtone Wirelessinfo Solutions has been having an incredible time in the market over the past few trading sessions. When I see gains as big as what we're seeing on this one, it peaks my interest. So, I did quite a bit of digging on the stock. At the end of the day, this one is likely to crash hard. Today, I'll let you know what I was able to dig up on KONE and why you might want to consider taking your profits and running now.
Any Fundamental News Surrounding KONE?
Any time I see massive gains on a stock, I look for something fundamental that has changed in a big way. So, I decided to do some digging in this area first. I dug and dug, but in reality there was simply no fundamental data to uncover surrounding Kingtone Wirelessinfo. The company hasn't released any great new products, they haven't signed a massive contract, there's no merger, no acquisition. There's nothing fundamental surrounding this thing at all.
So, What Caused The Gains?
Throughout the year, KONE has been having an incredibly hard time. The stock that has been on the downtrend has massively under-performed when compared to the S&P 500. In fact, since December 14th, the stock has fallen short of the index by 52.93% of the time.
Any time we see big declines like this, it gets the technical traders excited. After all, massive long-run declines lead to oversold conditions. The concept here is that KONE has been so battered throughout the year that it has reached support and had nowhere to go but up. So, we saw a bullish breakout that led to incredible investor excitement. As a result, the stock has grown by more than 570% over the past 5 trading sessions.
This Is Unsustainable!
The truth is that price movements in the market tend to happen through a series of overreactions. Did Kingtone Wirelessinfo deserve to drop so far? Probably not. But does it deserve to be trading at nearly 6 multiples of where it was just 5 trading sessions ago? Absolutely not!
What we're seeing right now is an unsustainable push to resistance. With such strong trends upward that seemingly have no fundamental cause, KONE is likely to hit resistance like a brick wall. In fact, I wouldn't be surprised to see this stock shed 50% or more in a single trading session, and soon!
The Good News
The good news is that if you got in on this trend early, you've already made a ton of money. Now, it's time to heed the lessons taught by Warren Buffet. When fear is high, it's time to buy, and when greed is high, it's time to sell. Just a few trading sessions ago, fear was high on KONE. However, greed is quickly taking over, pushing the stock into overbought conditions. So, you might want to consider getting out while you still can. This thing's likely to fall like a brick from the Empire State Building!