Wednesday, September 25, 2013

OK, Now It's Safe to Dive Into Sutor Technology Group (SUTR)

To tell the truth, I had almost forgotten about Sutor Technology Group Ltd. (NASDAQ:SUTR) after posting my "right stock, wrong time" speech back on the 9th. While I loved the way SUTR had broken past a horizontal ceiling at $1.83 after several weeks' worth of trying, the bullish move itself was a little overheated and looked like it was setting up a near-term pullback. Only after that dip would the stock be a healthy buy again.

As it turns out, though SUTR ended up gaining another 18% (+$0.38) after the 9th before reaching its high of $2.42 on the 16th, the stock did finally end up doling out that pullback. Good news though...that pullback was more than enough for Sutor Technology Group shares to hit the proverbial "reset" button on the rally, making it safe to wade back into a position. In fact, given the subtle clues behind the pullback's bars, it would be surprising if SUTR didn't rekindle the rally here.

For starters, Sutor Technology Group Ltd. simply brushed that former floor at $1.83 with yesterday's deep low, and immediately rebounded into what ended up being a gain for the day. When former ceilings turn into floors - as $1.83 did - they should be taken seriously... they're likely for real. That being said, even without the brush of the $1.83 level on Wednesday, the shape of the bar from yesterday still screams upside reversal. The open and the close were at or near the high for the day (a day with a very tall high/low range). That's, for the most part, a doji bar, which when they materialize after a sharp pullback generally indicate the transition from a net-bearish environment to a net-bullish one. Take a look.

All of that aside, if nothing else you can see how all of Sutor Technology Group's moving average lines are now sloped upward, confirming the trend is bullish in all the key timeframes.

Bottom line: SUTR may still be a little wobbly for a few more sessions, but the heavy lifting's been done; shares are above and beyond the big line in the sand at $1.83. And, Sutor Technology Group shares were already above a key resistance line in the weekly timeframe. There's still an element of risk to any small cap stock, but from a technical perspective, there's not a lot of risk left with this chart.

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