Post by
Starsearcher80 on Aug 09, 2022 2:51pm
ANATOMY OF CONSOLIDATION
Consolidation phases are important. They give pause to allow the stock to effectively "catch it's breath" in the midst of an extended rise. Secondly, it provides confirmation that the rally is valid. This validation test typically comes as retracements that retest levels of resistance to make sure that they are now in fact levels of support.
Consolidation phases typically go through a predictable sequence of events.
1) Short term traders, the most skittish participants in a stock, bail. Essentially, they want their jollies, and if they don't get them, they're gone.
2) Depending on the strength of the sale in #1 above, this may drag out some shares from otherwise naive shareholders who only see the price dropping, and don't have the background understanding to know what's going on.
3) The stock will typically move down to a known line of support/resistance. This is a bit of self-fullfilling prophecy because traders will sell down to it, and then also start buying at it.
4) The stock will typically pause here, and go through a series of bounces at or near the level The level will often hold if the tests become weaker and/or the volume becomes lighter. Alternatively, if the volume starts to increase, the stock breaks through the support, and moves down to the next level. Today we had an almost picture-perfect retest to the $29.00 level.
5) When a support level is tested, there is often a breakthrough of the support. Now, in the case today, the stock moved down to the support line, but there was literally no followthrough which was the first positive sign that the level would in fact hold.
6) Not only did the level hold, but the subsequent tests were quite weak, and the volume progressively lighter, which again is a good sign. Additionally, the general market has been selling off all day. Nothing dramatic, but if you're going to do a valid test, I don't mind seeing it within a broader market selloff. It gives greater visibility to the test in that you know that its not just the broader market offering support.
7) As the tests of the support level fade, traders start to recognize this, and start to buy in for the next leg up. This, in and of itself, creates the chart.
8) Because those who could/would have sold have sold, there is often a bit of a gap up...essentially a void of sellers, which causes the stock to suddenly start a visible upturn. We started seeing this about 20 minutes ago, and sure enough, the volume increase substantiated it. Traders again initiate this phase, once again looking for new jollies.
9) Now things get interesting. In terms of consolidation, if this rise continues it will show to be a very brief consolidation which is certainly a sign of strength, and portends a strong further rise to come. In a more generalized consolidation phase, this phase can last a couple of days to a week.
10) We "won't know until we know" what kind of consolidation this will be, until it happens. But traders and investors are really not that different, and really do the same thing just operating in different timeframes. Personally, the way this is trading I wouldn't be suprised to see a very high tight consolidation that proves to be remarkably brief. That the stock has already moved quickly (as I write this) back up to the $27.60 level will have a lot of eyes sitting forward in their chairs. If they start buying (and it looks like they are), the run resumes as this level is now tested and now dry.
Depending on the timeframe of the technical trader or investor, the buying will continue to come in. We have the short term traders already resuming positions. We'll see what comes from here. Always, it's a fascinating study of human behaviour as it applies to the real-time movement of a stock.
Comment by
glory7 on Aug 09, 2022 3:22pm
Good thing your here star, nobody would have a clue.lol
Comment by
Starsearcher80 on Aug 09, 2022 3:28pm
Gloryhole, everyone is on their own path to learn. I'm an optimist, so I'll suggest that there is even hope for you, who is clearly at the very start of any learning. However, your mouth and false ego currently block any potential. Be humble and eager grasshoppa. You too can learn. ;)
Comment by
glory7 on Aug 09, 2022 3:38pm
As I said you come on this board at the low when everyone here knows the change of direction and the course it will go with the turn around, don`t need a legend in his own mind to tell me why I`m here (fluck off).
Comment by
clubhouse19 on Aug 09, 2022 4:10pm
Gloryhole Doesn't take much to see your true hypocrisy as .you are one big scorned clueless ahole who still feels abused by the Bomber as they got rid of your axx.
Comment by
glory7 on Aug 09, 2022 4:18pm
So funny going to the plant next week with friends, gotta retirement pass to go at will,dream on club Foot lol.
Comment by
clubhouse19 on Aug 09, 2022 4:48pm
Ya sure LMAO Part of the cleaning crew I guess...pass to the toilets needed to get in What a joke you are for a snivelling ex grumpy employee who accuses insiders of illegal trading. Did you tell them that to their face ??
Comment by
bicente on Aug 09, 2022 4:55pm
Hey unholygloryhole , wanna meet up for coffee when you are in the neighborhood? I'm back in Montreal next week also ... GLTA
Comment by
bicente on Aug 09, 2022 5:37pm
Do you remember how fast the last idiot ran away when I got too close to his whereabouts ??? .. theses clowns don't realize the power of the internet ...I enjoy challenges , they keep me sharp .. then again , it's a waste of time ... ;) ... GLTA quote=clubhouse19] But an idiot you are !! [/quote]
Comment by
Micmar on Aug 09, 2022 5:30pm
Glory7, what kind of answer is that.
Comment by
MyNameIsNobody on Aug 09, 2022 3:39pm
I've unblocked you just to send a quick reply... that one is too easy. - Good thing your here g7, nobody would have a clue.lol Hope you're good at detecting sarcasm.