I’m not going to rehash what happened today, I think that’s pretty clear by now. Instead, I’m going to look into the future and use my new weapon to go short hunting!
So, there is this week’s weekly. Not much to say which isn’t already known. We finally confirmed the doji from three weeks ago by closing over $2.09. Yay! That cyan line, that we pretty much closed right on, is the 10 week moving average, which is the same as the 50 day on the daily. I’d like to see a solid move and close over that, but one step at a time. That wasn’t the monster volume I was hoping for, which leaves me a little uneasy about a short term pullback happening, but again, one step at a time. It took a year to get here, don’t expect it to return form where it came in 24 hours.
Another really nice thing is that it closed above that downtrend resistance, shown in the pale yellow lines. Again though, I’d like to see it get some distance from it as that is probably my biggest concern along with the remaining short interest right now. It closed above it on 1/22 also, and look what happened then. However, the candle this time is a pretty solid move above it. That last one was weak and got hammered back down by a little FDA decision.
Finally, I had talked about a spring forming. I had guessed it would form below the trend resistance at $1.68. Maybe I was only half right. It sprung from the minor support at $1.80 instead. Next we just need some follow-through. Or, perhaps my major support line should have been drawn at $1.80 to begin with, then I could have predicted that better. Lesson learned!
Now the fun stuff! I’ve made it pretty clear that my focus is that remaining 66 million short position. Until I see that return to around 40 million, only because that’s where it was before the aggressive shorting started, I won’t breathe easy. In my last post I mentioned a creepy sounding thing called dark pools. I know of them, but not really how they work, so being the nerdy type that needs to know I decided to find out. Let me tell you, once I did, it kind of pissed me off!
Long story short, an institution with a large order enters one of these private exchanges (dark pools). Then, they place their orders there. The price used to make the transaction is the same as what’s posted on the public exchange. After the transaction is made, the institution leaves the dark pool, but is still required to report the price it was made at to the public boards within 90 seconds of the transaction. Finally, the price is posted to the public, but no order information is ever known because it was done in private, so the whole transaction goes by undetected by people like me. EFFF THAT! Oh, and another FYI. You know how sometimes right after the market closes you get a big move in price after hours, and everyone gets all giddy over it. A lot of times, that’s just these private exchanges reporting their final transactions 90 seconds after being made. Just that the transactions were made right at the closing bell.
Anyway, moving on. Now I’m thinking this is impossible. It’s beyond rigged! I kept searching for something to counteract such deceit. Actually, there is a very good, and honest, reason institutions use dark pools. I won’t get into all of it, but like every good intention, it gets abused. Kind of like the internet was intended to be used for government research and communication, but instead became the worlds biggest distribution of porn.
In my search for retribution, I found a little doohickey called the Balance of Market Power indicator, or just Balance of Power (BOP). Perhaps you know all about it, but it’s new to me. Again, without getting into the specifics, it is a way at looking at price quotes where you can see the balance of power between bulls and bears. Because dark pool prices are still quoted, you can at least see how they effect that power struggle, if not how they effect the market. You still have no way of knowing if the BOP is moving one way or another because of dark pool data, but in this case, with what we know, I can make some really good assumptions.
As an added bonus, the indicator is also really good at predicting future price movement. I know there are other indicators where you look for divergences between the trend of it and the price to help predict future price directions, but this one makes good sense to me. It also seems to do a good job at validating my volume and price analysis, that’s probably because it gives me an edge over incomplete volume numbers due to dark pool transactions. Yay again
Yikes! That’s a hot mess. I’m going to break this down from a big weekly picture to detailed daily view to make it easier to understand. First thing I wanted to do is prove to myself that the divergences are actually giving me legit information. This is the weekly going back 3 years. That cyan line is the 10 week moving average, same as 50 day on the daily. I’m using that to see basic trending directions. All the red and green that looks like Santa Clause took a Trulance all over the chart is the BOP. That white line is ground zero, the red bars are where bears had the control, green for bulls. Simple enough.
Now, when the 10WMA is trending down we look at the lows of the red bars. Starting from your left, you can see where I drew the orange arrow across those lows. The arrow is pointing up while the MA is trending down. That is a divergence that should signal a change in trend is coming. If you waited for that third higher low shown by the first small yellow arrow, and bought at the close, you would have gotten in at $2.67. You would have then enjoyed an up trend, right on Q. Then, because the MA is now trending up, we measure the highs on the BOP green bars. The second long orange arrow shows the lower highs diverging against the rising MA. That would be your exit signal. Sure enough, if you sold at the close on that lower high day in the BOP, you would have exited that trade at $6.73. Not too shabby! If you were really good, you would have shorted right after that sale and enjoyed all of 2017 as a short ribbing the bulls on StockTwits. Finally you would have covered right about were that AR marker is. If only I knew then what I know now. EFFFFFF!
We can’t cry over spilt milk, so we will look forward, and from what I see, we have some good things to look forward to. Do you see what I see? If not, I’ll get to it in just a second. But first, see where I marked that PS? That’s where I guesstimated the setup to start an accumulation trading range. I’d be Captain Obvious to say the bears have controlled this stock for some time now. You can see all those red bars pretty clearly. Follow my markers and phases which show what I think is the flow of accumulation. Bears are still in control, but during that time, look how quickly those red bars are shortening. That looks like pretty good evidence that my timing of the accumulation is right on the money. If we were to continue that trend in the BOP, it won’t be much longer before bulls take control. Remember the sense of urgency I talked about in my last post? I believe you are getting a visual of it in that trend of changing control.
Speaking of that last orange arrow, back to what I started pointing out earlier. Did you see it? Yep, you got it. The MA is trending down and that last orange arrow is blasting up. That is happening right now as we speak! Super divergence! If it works like it did in the past, that’s a big neon “Change of Trend Coming” sign. Yay Yay!
Here it is, up close, in case you didn’t see it.
You’d think that alone is enough good news, but if you call in the next 5 minutes, I’ll throw in some more fun facts. All for the low low price of nothing!
You know in the intro to James Bond movies where he is walking, then turns to the screen and shoots and blood comes running down the screen? That’s the first thing I though of when I saw that chart. Eeew! So, there is the daily. It’s a Sunday bloody Sunday. Look at that first area in blue. From looking at the price and volume in that time frame, nothing looks special. The only thing of note is the abrupt loss in control by the bears, as shown with the orange arrow. Granted, the bears still control it, but there was a good fight by the bulls there. Any idea what happened? That was the time frame of the last short interest report. You would never know it by the price and volume, but the BOP shows something going on. We now know, that was the time of 10 million shares being covered. That could have been a covering in dark pools or just a strategic covering to keep it unnoticed by us to not run the price up. So, I don’t know if that’s from dark pools or not, but if it is, at least I’m seeing the results in some form to help level the playing field.
Then you notice the next blue area. Again, I really have no idea, but I do know there are still 66 million short positions open and perhaps that little abrupt change is more short covering. All that conveniently right before earnings, and we know what happened there. Tell me again this isn’t manipulated.
Finally, I did say that yesterday would be a day of fear mongering before earnings. The little yellow arrows show the effect of that. bears were in big control yesterday trying to drive the price down. Consequently, that formed that spring just below that support at $1.80 I mentioned in the beginning.
Congratulations to everyone who was brave enough to stick it out, or really had no choice because they are so far down they can’t sell now. Who? Me?
P.S. We won’t know for sure where we stand on the short interest for a couple of weeks. So, no telling if they actually covered more or not. With that, and the fact that bears are still in control, I’d remain cautious. However, buying small amounts on dips to build a position may not be a bad idea.