Testing, testing 1,2,3. Lot’s of testing going on here, but the grade isn’t in yet. So, I thought last week might have been a successful test, but apparently the verdict is still out.
Looking back two weeks, where the yellow arrow is, we got a doji. At the time I think I said it looked like it could be a reversal because the selling from the top of the range had finally lost it’s dominance. I may have been right about that part, but the doji was never confirmed or rejected, so no reversal. You can see in the magenta lines the range of that candle. We haven’t closed a week above or below, so it’s still in play.
So, the indecision continues. Booooo! We want instant gratification damn it! As if the manipulators care what we want.
This weeks volume was low, but it was also a short week. If we would have traded Monday, this week’s volume would have been more than last week’s, but still below the 10 week average. That’s a good sign. When the volume stays low on a test of support, it means there wasn’t a resurgence of supply in that key area, so the manipulators can start marking it up with less risk of sudden supply stopping them.
Those trend lines I drew in the pale yellow are a little worrisome. I’m not showing all the way back through last year, but those trend lines show the range from the high of last year to today. We are hugging the resistance line of that down trend, but I’d really like to see it make a definitive move over it.
My focus is the weekly, but here’s a little tidbit from the daily that looks encouraging. First of all, today’s close was a nice hammer, but again it’s just noteworthy and not really actionable until confirmed. That means, it would be nice to get a close Monday above today’s high of $1.90 to confirm a reversal. Second is today’s volume. Granted it’s still pretty light, but was the largest on the only up day of the week.
I bet you’d like some more encouraging news wouldn’t you? Well, ok… twist my arm. I read a lot about the daily short volume and how high the percentage has been. So, let’s break that down for a moment from my perspective..
First, the percentages are above average, but the overall volume is low. So, relatively speaking, the actual number of shares being shorted aren’t as scary as the high percentage sounds. Never the less, it’s still above the average which seems bad.
Second, let’s put that it in the context of the manipulated testing I keep rambling on about. The point of a test is to take the price down to a level of previous support. In this case, they are testing the support of the accumulation trading range, which is the bottom of the selling climax (see the first weekly chart). During a test, the manipulators aren’t actively accumulating, they are just moving the price down and testing to see if it’s safe to accumulate at this level. They are dropping the price by shorting it, so during a test, you’d expect the daily short volume to be higher than average, it’s how they manipulate the price lower.
Third, this accomplishes two things. First the obvious, to test the lower prices. Second, it entices retail shorts to join the short party. They are thinking this is it, dooms day is here! Look at Volume Bot to see the daily short volume during the week. It looks like about 5.6 million shares were shorted in the past 5 days. Some of that is the manipulators and some is retail. Once the manipulators are satisfied the test passed, if it passes, who do you think covers first? Manipulators or retail? DUH! So who’s behind that curve? DUH DUH! So, it wasn’t dooms day after all, the takedown was by design and the retail shorts will be the last to know. All that covering helps drive the price back up, as it was manipulated to do.
Fourth, this may be the scary part. I’ll start by saying this is all a guess based on past performance of this stock and visits to my local Voodoo priestess, because there’s one on every corner down here in New Orleans, just like in the movies. You may be wondering, as am I, if manipulators cover, then retail covers and by the time that is done we are back to the top of the range, when do the manipulators actively accumulate at that low price? Enter… earninggggggggs announcement. I could never know if this is how it will go down, but it wouldn’t be a surprise if it does. I can envision something like this:
- Manipulators cover the shares they shorted to bring it down for the test
- Retail shorts cover at higher prices which drives the price up some more
- Longs see this as a sign that earnings will be good, they buy in anticipation of Thursday which drives it up more
- By Thursday we are back up at the top of the range around the $2.40 area
- Earnings are released after the close Thursday, and no matter what they are…
- Friday we get crushed all the way back down to $1.80, possibly even touch below support at $1.68! Well, ok I won’t be so dramatic. The knee jerk will be Friday, but it will take part of the next week to get that far down from the $2.40 area.
- Once we get back to this area that we just tested, then the manipulators start accumulating again. We would see the really big volume as it sells off and then candles with long lower wicks as they absorb it. That’s when you add, not sell into the fear, of which there will no doubt be plenty.
They would likely need to do something like this to, once again, cause panic selling. It’s the only way they can get the volume of shares they need to accumulate. That’s why they do shake outs. So, that’s what will happen in the next few weeks… or, not.
But, if it does, hang tough because it could get hairy after earnings. If it does get to $2.40 and you have a profit, or break even… hell even if you have a manageable loss and you feel overextended, it may be a good time to let some loose. You should get an opportunity to buy it back lower, but hopefully not too much lower.