AUDC - 25days after New 78 days High

Mar 5, 2019

New 78 Day High - AUDC - 26days after

Last January 30, 2019 I posted AUDC having a similar move with SPPI reaching a New 78 day High.  It has been 24 trading days that passed by and the stock has not broken its previous high yet.

THE SPPI DIFFERENCE

Unlike with the SPPI, it rallied after 5 days in small increment along the 18SMA (Green simple moving average) reaching a new high of 10.77 from 9.09, $1.68 more. This was 135% increase from the original height of the New 78 day high candle which was only $1.24 in height (Low of 7.85 and high of 9.09). The 1st New 78 day High of SPPI had a gap-up (See N78 1st Gap-Up), which was followed with another New 78 day high after 24 days up and 12 days down. These are some of the differences.

TECHNICAL EVALUATION OF THE AUDC MOVE.

If we have to observe carefully, AUDC have the following discernible pattern.

1. The price is no longer respecting the 18SMA line (green line). Feb. 13 to 21, 2019 the price was below 18SMA but had been supported by 50SMA (purple line). Feb 25, 2019 AUDC broke out above the 18SMA and yet broke down again today March 5, 2019 under 18SMA line.
2. There is a very noticeable discrepancy of AUDC's price/volume pattern. The red candle today March 5, 2019 is a big red candle signifying a strong selling sentiment. But if you compare this to its volume, it does not add up. The volume is very low. Something is being manipulated here. The Market Maker seemed to be shaking the apple tree to wipe out stop losses and bring down the price to waiting and hungry deep pocket buyers. 
3. If you base this pattern with Turtle Trading of which when a stock makes a new 55 days high and does not follow through for 21 days, then trade should be exited. AUDC failed to break-out from the New high and price had been contracting for 25 days, it is time to be on the sideline for the time being and wait for the right timing.
4. The over-all trend is still up based on the 200SMA and 50SMA. 50SMA is above 200SMA and the price is still above 50SMA.
5. Based on the book "Trade like a Stock Market Wizzard" by Mark Minervini, AUDC seemed to be creating a VCP (Volatility Contraction Pattern). The following charts showed that it has created a footprint of 25D-18/8-3T. Since the time it made a new high, it's been 25 days with a contraction ranging from 18% to 8% with 3 consecutive contractions. We need to wait for another contraction of which the percentage ranges from 7% to 1% then followed with a breakout at that tip of the yellow triangle. The candle should be a strong break-out candle with a good amount of volume to sustain the move.

If the next bottom will not break B2 and the price will continue to funnel to the end of the yellow triangle the possible pop-up would be on April 22, 2019.  If it continues to break down then we are looking for possible support at 12.91, 12.00 and 11.71.

FUNDAMENTAL EVALUATION:

From the Disclosures compiled by OTCMarkets.com AUDC had the following:

1. Jan 28, 2019
   > AUDC posted a Q4 result of 10.4% Year over Year Revenue growth,
   > Net cash provided by operating activities for the quarter
       was $11.62M, compared to $9.36M a year ago.
   > Company has Cash and cash equivalents of $31.5M, as of December 31, 2018.
   > Repurchased 250K of its ordinary shares.
2. Feb. 11, 2019, AUDC declared 11cents semi-annual dividend.
   > This is a new incentive to investors.
   > Although most investors shy away from dividend stocks
      if the track record is below 10 years. AUDC has only 1 year.
   > Nevertheless, This is a significant additional incentives to investors
      who would like to commit early.
3. Feb. 13, 2019 Amended Disclosure of Morgan Stanley Capital having
   > 2.3M shared volting power
   > 2.3M shared dispositive power
4. Feb. 15, 2019 Ammended Disclosure of Richard Marshaal, Senvest Management LLC
   > 678K shared voting power
   > 678K shared dispositive power
5. Feb. 11, 2019 Ammended Disclosure of Shabtai Adlersberg
   > 5.3M sole voting power
   > 5.3M sole dispositive power

Now if you interpolate the Fundamentals and the technical it seemed that we have a lot of supplies held by the higher management. With the rise of AUDC's stock, it's but natural that they probably liquidate a portion of what they owned as shares. Since there is tremendous amount to dispose, they have to liquidate in smaller quantities so as not to create a waterfall. This is also a strategy of bringing the stock down so they can purchase more shares at a lower level. We are looking therefore a temporary downfall of AUDC's share price until these deep pocketed guys start buying again.