Chart: Negative Divergences in GROW

If I were a betting man, I'd bet that GROW (U.S. Global Investors, Inc.) is going to run out of steam any day now. The recent breakout to new highs has done so with lower volume, lower RSI and lower stochastic readings than its September highs. What we have here is a textbook example of negative divergence, which does not bode well for the stock, at least in the short term. I woudn't be surprised to see a pullback to support at $34. A break of that support level could send the stock down to $30.

An aggressive trader could short now with a stop placed a little above $40. This is a risky trade since, even with the divergences, price has yet to taper off and the stock is riding the upper bollinger band. However, it could payoff big and the actual dollar risk is minimal with a tight stop in place. The more conservative approach would be to wait for a breakdown of the $34 level before entry. An "in-between" method would be to wait for price to come back inside the upper bollinger band, right around $36. I'm not yet sure which approach I'm going to take, but I will be monitoring this stock closely.