Sir Paul McCartney said, “Long and winding road”. Actually, that’s a terrible analogy for SGYP. It’s road hasn’t been winding at all. It’ pretty much been just down.
I don’t think we need a recap of the last month or so, it was… let say… forgettable? I’m not going to lie, I’ve posted some on StockTwits, but have mostly stayed away from it. That thing is just one big emotional roller coaster, and it’s even got me questioning myself and being wishy-washy with what I think will happen next. That board is just one big recipe for emotional disaster at the moment, so I’m going to try and get back to center here.
You may have seen me say I was expecting capitulation, then I said no to capitulation, just a continued melt down. I know I’ve been a moving target, but either way it doesn’t matter, the point was I expected, one way or the other, to make new lows. So now, here we are at new lows. The reason I was expecting it was in anticipation of a spring. I’ve been anticipating one for a while, but is has yet to happen. Now, I’m looking at the weekly chart and finally seeing one potentially developing.
Let me step back for a second and answer this question… “What is a spring?”. That might be helpful to know. As a matter of fact, I will let some people with a heck of a lot more credibility than me tell you what it is. This is from The Wyckoff Method: A Tutorial
Here is another chart that was sent to me on the boards. It is another interpretation of the one above:
See where it sais “low volume failed sell off”? That’s more of a spring than where it says Spring. This past month has most definitely been a low volume sell off!
Here are some screen shots from the book Trades About to Happen: A Modern Adaptation of the Wyckoff Method that are relevant to this spring idea as it applies to SGYP.
So, there are a few blurbs from a really good book that cover the situation we are currently in. It talks about springs and low volume and, if you were paying attention, how bad earnings reports are used to create the wash out. Guess what happens after the bell this Thursday?
Now that we know what a spring is, you probably want to know why I think one is possibly setting up now. First off, I’ve been expecting one. Granted there were times that I thought we would break out without it occurring. However, each of those times the breakout was rejected. Here is the current weekly chart:
As all the documentation said, a POTENTIAL spring occurs when there is a break of a lower trend line without follow through to the down side. That pretty much describes exactly what happened this past week. Add that to the fact that the week ended in a text book reversal hammer, and things start adding up. As pretty as that hammer is, it still need to be confirmed by closing next week above the high of this week, which would be $1.65.
The one thing I’m unsure of is the upcoming earnings. I can see two scenarios for that: 1) the earnings give the price a boost that enables next week to close above $1.65. That would confirm the hammer and be a good indication that the reversal is in progress and the spring is sprung. 2) the earnings cause a sell-off that quickly “springs” back which let’s the manipulators do a terminal test of demand, as the book quoted above suggests.
Obviously we would prefer scenario 1, but I can definitely see scenario 2 happen especially now when sentiment is at an all-time low. A gut punch like that would certainly shake-out the weak hands and invigorate the retail shorts, which would be the point of such a terminal test.
So, this is the first thing I’ve seen worthy to write about in over a month. Up to now it’s been pretty ho-hum. We’ve just been grinding lower do to the prevailing fear in this market, and lack of anything certain. Judging by the very low volume, this grinding down isn’t because of overwhelming supply, it’s more a lack of demand. The lack of demand is a direct result of that fear and uncertainty. If there were something fundamentally wrong with the company that we were unaware of, I’d think the volume would be much higher as those in-the-know exit stage left ASAP.
There’s not much going on in dark pools up to the data have, which is through March. Dark pool activity has been below average, which leads me to believe this whole melt down has been retail shorting and weak hands exiting. Again, all by design. I’m not going to post my charts that show DP and SI, because they have been uneventful.
The BOP got scary low the week before last, but this past week rebounded well. Most of the recovery was done in Friday’s move up.
The trend in the BOP is still a higher low, but got really bad two weeks ago. Ever since last earnings, the bears have been very aggressive. I think that is also pretty obvious by looking at the posts on StockTwits.
Then finally there is the SI. That is the most important number of all in my opinion. The last report saw a marginal increase. Of course we want to see it go down, but a million shares over two weeks is basically inconsequential. I believe retail shorts have been feeling their oats, so that is where the increase is coming from, not smart money. I wouldn’t be surprised to see another small increase on the next one for the same reason. Adding retail shorts is a good thing, if this is a setup for a spring, those retail shorts will only make it a more powerful move when its sprung.
On the other hand, if there is a significant increase in SI, well… I’d rather not say.
Keep in mind the next SI will be reported on 5/9 after 4 P.M. Eastern and will cover the second half of April. That means the week before last which was very bearish by looking at the BOP. So, don’t expect anything great. However, in the event that it does show a decrease, that’s a pretty good indication that smart money has been covering in dark pools while retail has driven it down to some of it’s lowest prices. That would be easy on the eyes! It would also give more credibility to this spring idea as smart money has covered and may be ready to move it up again, at least temporarily.
Hopefully it won’t be over another month before we meet again.