One's Heating Up, the Other's Cooling Off (MITK, RCON)

Anybody who was lucky enough to get into a Recon Technology, Ltd. (NASDAQ:RCON) position before October 7th, then congratulations - you're up big-time. Now get out. Instead, a better use of that capital is Mitek Systems, Inc. (NASDAQ:MITK). While RCON is overbought and ripe for a pullback, MITK is itching to stage a breakout.

The outlooks for both stocks won't be particularly well-received ... especially for Recon Technology, which has become one of the market's most-loved darlings since late last month, with shares rallying as much as 140% since the end of September. The weight of those gains is starting to take a toll now. As for Mitek Systems, while suggesting it is a buy won't create any ire, traders are probably aware it's been weak since June, and stuck in a range since July. The explanation for both calls is, nothing lasts forever.

RCON, in simplest terms, is slowing down. It's more than slowing down, in fact. It's testing the waters for a pullback. We've already seen a string of lower highs, and the distance between the daily lows has been getting smaller and smaller for a week and a half as more and more traders are starting to see Recon Technology, Ltd. as a profit-taking opportunity than a new buy. The irony is, the weaker it becomes from here, the more people will be interested in taking profits, and the less people will be interested in stepping into a new position in the stock. The clincher will be a close under yesterday's low of $4.44, though there's enough downside packed into the chart as it is right now to merit getting out, or even going short.

MITK, on the other hand, is quietly getting into position for a huge bullish wave.

The key to the upside from Mitek Systems is the bounce off of the 200-day moving average line (green) in early October. That was the same prod for the April-June bullishness. It's not just the bounce off that key long-term moving average line, however, that's saying shares are at the beginning of a new rally. MITK is also just pennies away from breaking above a major line in the sand at $5.63. That's where the 100-day moving average line is right now, and it's where a more recent horizontal ceiling has developed.  The "V" shape has already formed, however, so this is more a matter of when rather than if, not unlike the break above the $5.00-ish level in April that spurred a huge runup. One more nudge should light that fire.

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Just bear in mind these are short-term, technical outlooks, and not long-term judgment calls on the merits of either company.

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