WidePoint Has Quietly, Subtly Taken a Turn for the Worst (WYY)

I'll be the first to confess I was wrong about WidePoint Corporation (NYSEMKT:WYY) back at the beginning of October. I figured it was poised to move higher, and it's done anything but move higher in the meantime. Rather than lament the errant call on WYY, though, I'd really rather spend time seeking out and planning the next opportunity. It just so happens that the next great trading opportunity I see is WidePoint Corporation again... this time as a bearish possibility.

Just as a reminder for the unfamiliar, WYY is tech stock. Specifically, WidePoint Corporation offers cybersecurity and wireless/mobility services to public and private customers.

It's been an OK business to be in. Although revenue has been uneven over the past five years and profits haven't been guaranteed, WidePoint could be categorized as successful more often than not. On the other hand, for investors to stick with the stock and continue to bid it up, a company needs to be more than "occasionally successful." And, judging from the recent chart of WYY, investors finally seem to have reached their patience threshold with this company.

If you'll remember from the early October outlook, I liked the way WYY had been getting squeezed into the tip of a wedge pattern, and was optimistic about how the stock was finally being unleashed with a whole bunch of pent-up energy behind it. As it turns out, however, the bullish breakout move above the upper edge of the wedge wasn't meant to be. Instead, WidePoint Corporation shares simply drifted lower, breaking under the lower side of the wedge pattern, and in the meantime have broken under all the key moving average lines. Take a look.

It may all seem minor on the surface, but these subtle clues are actually a very big deal. Shares are below the pivotal 200-day moving average line (green) for the first time since early 2013, and the stock was on the way up at that point in time. This is the first time in a long time the 200-day moving average line has failed to prop WYY up. This indicates a pretty significant paradigm shift... for the worse.

As for where WidePoint Corporation shares are apt to finally hit bottom, it's not super-clear. It may be more fruitful to look for a capitulatory event rather than assume a particularly price level will be the proverbial "uncle" point. It's one of those situations where you may not know what it's going to look like, but you'll know it when you see it.

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