https://profit.ly/content/premium/23076

 

$COSM

- no history of running multiple days, creating new highs (at most 2 days)

- gapped up on potential second green day

- spiked at the open

- has volume

 

Importance of waiting for the 9:45am window

Created SUPPORT in the 0.54-0.55s after the initial spike and pull back - with volume - buying power that creates support - holding up this level - has trouble breaking out but keeps holding this level - consolidation

Has range to the upside from the morning spike in the low 0.60s

When stock breaks out over the consolidation level in the 0.54 - can buy that stock - clear risk at the support level and upside range to the 0.60s from the HOD at the open

Not an ideal setup as this is a potential second green day on a stock that does not have history of running multiple days, but support, range and volume is there.

All the buyers that are coming in once breaks out over support (momentum longs chasing and shorts covering) - do not really create support - just push the price upwards, towards the next resistance level.

At resistance HOD - longs who bought at support are now selling and taking profits, so this buying powers falls off. Shorts have been squeezed out and/or may now be adding/starting new position based on new HOD and history of the stock (no multiday runner) -> selling power

Stock in the 0.60s over-extended + history -> not many longs interested in buying a stock that is overextended and just put in a new HOD and now is failing.

Great example of how previous resistance in the 0.54s gets tested on the way down and then fails -

- shorts in the stock, pushing price down

- bagholders who chased stock up in the 0.60s selling into potential pops/bounces

-> lot of selling pressure and very little buying pressure

combined with history of stock: no surprise that it cannot hold support in the 0.54s

 

Distinguish between

- real support (consolidation, volume, near whole half/dollar, across different time frames)

and

- price action creating "air pockets/gaps" - on the long side, longs chasing/riding a spike and shorts panicking/covering into a spike as the stock has accelerated upward momentum with volume. The range created during this period is not support and stock can fall back very quickly through this range.