I categorized today’s Game Plan as a good call. It didn’t get that scary opening the next day that I thought, or the hammer. In fact, it was strong from the open and closed with a nice wide spread candle. Ultimately though, it did close green staying above support and did so on increasing volume, which is what I was calling for.
Here is today’s action on a 15 minute chart starting at noon. Before this it was drifting lower, which wasn’t unexpected after yesterday’s weak close and the whole tech industry taking a beating in the morning.
However starting at noon the downward move accelerated. At about 1:15 was a big surge of volume and created a long candle that ended with a long bottom wick. I saw that as stopping volume, a sign of strength. It looks as if wholesalers came in to buy the down draft as the prices went below the support to stop the waterfall and pick up some cheap shares.
The next candle was on much lower volume and resulted in another candle with a bottom wick, as well as 4 candles after that. After that large volume surge, the following candles may have been a series of low volume testing to see if all the supply was absorbed, but I like how the day ended going into tomorrow and I’m thinking we will see a reversal back up based on today.
Here is today’s daily in context to the last 5 days. Looking at 6/8, I think that is an anomaly, and made me suspicious. It is easier to see on the charts when it’s not zoomed it, but the volume was high, but the price action seemed low compared to other days with similar volume. So, the result did not equal the effort. The next day you have just average volume, but the price action was about 50% more than the previous day, so less effort, but a good bit more result. My guess is that was a shake out by the wholesalers to get retail to sell. The next day was average volume again with a long wick doji, that shows indecision as retail was probably pretty confused by the shake out and not sure what to do next.
The next 3 days, ending in today, are going down on rising volume. I think wholesalers are marking it down and creating fear, then coming in and buying those weak shares, which would account for the rising volume. Finally, in light of today’s micro analysis above, you can see it was high volume again like 6/8. All the volume today came in that one move described above to stop the waterfall.
Today did close back above support, even though it crossed it for a moment. As I said above I am expecting a reversal, perhaps tomorrow, but I wouldn’t be surprised to see one more push down to really get retail afraid and make sure sellers are out. It will be scary, but if I’m right it will recover at the end of the day and form a hammer.
Here is where I get into trouble. This is a weekly chart going back to 2014. For a good 2/3 of that year it was a lower volume accumulation phase. The last 1/3 of the year it up trended, the started 2015 in distribution for about 1/3 of the year.
Then there was that long up trend on really big volume that ended with an enormous drop on extreme volume. Basically, one week of price action took out roughly 6-7 weeks of gains. So, was that one week in itself a distribution phase? I think it was. So, leading up to this week, I think we are back in accumulation at a higher level than a year ago. This week we are right there at support, moving down to it overt the past month on falling volume. I see that as a good sign as this is the third time it is going to support, each time before it was on lower volume that ended with a high volume spike.
The trouble is, what if this whole range shown has been distribution after that big move up to the highs? I am still expecting a good bounce very soon, but if it falls below support and doesn’t reclaim it, I think I will have to bail in case I do have me accumulation and distribution wrong.
A final note on the overall picture. I just mentioned that this is the third time testing support, which would also be a triple bottom. A triple top or bottom would be a reversal or continuation of the previous trend pattern. However, which one? If we hold support here and get good volume behind it, It would lead us to and eventual break of that upper resistance and then an even larger move to continue that previous huge up trend from last year. If we break support here, this is toast! So, all of that triple bottom business coincides with the volume price analysis.
I think the opening tomorrow could be scary as the wholesalers shake out the remaining sellers and crush it with fear and break support, but will ultimately end the day above support creating a nice hammer on more increasing volume. If I can survive it, I think next week will see the reversal back to, at least, that first line of resistance where I may consider selling 1/3 of my position.