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TORONTO — People say, big things come in small packages, and it appears that nanotechnology fits that description, as it is likely to become the "next big thing". Nanoscale or Nanotechnology is basically the science of building things on a molecular level (sizes one billionth of a metre) and research is indicating that nano-structures exhibit superior electrical, chemical, mechanical or optical properties.
Nanotechnology it appears, will be revolutionary technology, which will likely usher in another era of breathtaking social and economic advancement. Analysts' opinions vary however, as to the viability and timing of investing in nanotechnology companies today, stating there is a lot of hype and not much substance, thus caution is warranted. However technical analysis uncovers two potentially intriguing candidates within the sector.
Nanogen Incorporated develops products that integrate advanced microelectronics and molecular biology into a core technology platform with broad and diverse commercial applications in the fields of genomics and biomedical research, medical diagnostics, drug discovery, forensics, agriculture, environmental testing and potentially the electronics and telecommunications industries. The Group's products include the NanoChip System consisting of NanoChip Molecular Biology Workstation and the NanoChip Cartridge, which enables identification and precision analysis of biological test samples containing charged molecules.
Technically, the stock appears to be a buy at current levels. The share price appears to be tracing out a bullish inverted head-and-shoulders pattern with the right shoulder under construction at the present time. The pattern can be frustrating as it takes a great deal of time to complete, but once it breaks out above the neckline resistance level registering at about $3.20 (U.S.), its rally will be breathtaking. Since the pattern is about two-thirds complete, and is usually somewhat symmetrical, it might only take another two months before the right shoulder is complete.
The moving average convergence/divergence oscillator (MACD) confirms that the stock is exhibiting positive divergence since the oscillator registers higher lows when the stock price registers lower lows. Although the MACD continues on a sell signal as it trades below the zero line, it appears as though the oscillator is trying to flatten out. As such it shouldn't be long before it is back in a positive mode. A close above the $3.20 resistance barrier will signal a potential breakout and the stock should proceed to rally to the pattern's technical target level of about US$4.16 over the next six months.
Nanometrics Inc. is a leader in the design, manufacture, marketing, and support of process monitoring systems for the semiconductor, data storage, and flat panel display industries. The company's primary products are thin film measurement/analysis and overlay metrology systems. These products are used to analyze manufacturing quality at critical steps in production and to provide feedback for production control or notification of out-of-control processes.
The chip materials producer's technical chart indicates that the stock has formed a symmetrical triangle over the past 1-1/2 years. Unfortunately trading has progressed more than three quarters of the way into the triangle thus making the pattern lose its potential bullish potency. The stock has had a flurry of activity in the apex of the triangle as the stock tries to find a clear direction.
The weekly chart ended on a negative note and the 10-week MA is turning negative, thus further weakness in the stock may be expected. A decline to the 41-week MA at about $12.35 and potentially down to the lower Bollinger band oversold level at $10.80 may be needed to move the stock out of weak hands before it is able to resume its rally. Investors should look to buy the weakness or wait until the stock closes above overhead resistance at $15.25, as the stock should rally to about $24.50 over the ensuing six months.
Yola Edwards is a contributing writer and technical analyst for Bell Globemedia Interactive, providing options and technical analysis research on a variety of North American equities.