Energy Conversion Devices (ENER)

Earlier I noted that Energy Conversion Devices, Inc. (ENER) was off to a positive start and that has continued. The shares are now up more than 40% to a new annual high. The question now becomes this - is it a good time to chase to the stock? Let’s take a look…

Chart Courtesy of Thomson Financial

Today’s surge clearly puts the shares above near-term resistance at 35. It also puts the stock in overbought territory as the 9-day relative strength index (RSI) pops above 80.

I think that part of this surge could be attributed to short interest. According to data collected by our Quantified Analysis department, 25% of ENER’s float is sold short. Recently, we have seen a number of heavily shorted stocks surge higher after reporting earnings and this seems to fit that mold.

With that in mind let’s turn to the weekly chart…

Chart Courtesy of Thomson Financial

Here we see that ENER has clearly broken the downtrend that was place from January 2006 until February of this year. Today’s surged is clearing out a number of former resistance zones with the area near 40 being the closest to the stock now.

In terms of chasing the stock, I think that depends on time horizons. If I am a short-term nimble trader, I might be tempted to try to scalp some additional gains here. If I am a longer-term investor, I might be temped to let the short-term overbought condition work off and look for a pullback toward support.