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Merrill's comments got me thinking

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A couple of weeks ago we were talking about the powerful move taking place in the Disk Drive Index (DDX.X). My thoughts then were that something might be taking place in the PC sector, where some of these stocks that provide components for the space had the MARKET bidding those stocks higher.

Today, shares of Read-Rite Corporation (NASDAQ:RDRT) got my attention as I was punching up some stock symbols. My bar chart showed the stock was breaking above a downward trend after hovering around a retracement level for the past couple of weeks.

Read-Rite Corporation Chart -

Today's trading in Read-Rite (NASDAQ:RDRT) looks suspicious. In fact, it looks like market makers may be trying to get away from their "bearish" inventory and trying to get back to a more "neutral" to slightly bullish inventory position. The reason I think this is how the stock hovered near the $5.80 level and 61.8% retracement level for nearly two weeks, then all of a sudden, volume comes into the stock and trades right up to 50% retracement. Look for the stock on pullbacks near $6.00, but it looks like things are turning toward the bullish side.

I also pulled up a point/figure chart of Read-Rite (NASDAQ:RDRT) and that had me saying "Ooooooo."

Read-Rite Chart - $0.50 box

The recent quadruple-top buy signal at $5.50 and break of downward trend on the point/figure chart has demand back in control of Read-Rites stock. I've added a volume bar on the point figure chart that tabulates volume traded in the represented columns. It is readily apparent that there were a lot that wanted in on the upward move from $3.75 to $10.50 and then there were those that wanted out on the breakdown. Todays volume spike of 2.8 million, may be the beginning of a "get me in" phase.

Jeff Bailey
Senior Market Technician
Option Investor

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