My last trade was based on an old pattern that repeated itself. There is another pattern that I would like to elaborate a little bit more on. This pattern has existed for almost two decades and maybe even longer. Especially recently it has become more and more relevant. This is the pattern of a stock moving exponentially for a few days before finally crashing. After the crash there often is a partial rebounce before a month long slow decline sets in.
Do you rembmer my post in November about how “Donald Makes Shipping Great Again“? What stocks in the shipping services industry were doing at this time, now can be observed again.
Let´s start with one of the Shippers to see the pattern. Sino-Global Shipping America, Ltd. (SINO) in a matter of a week went from $1 a share to as high as $15. That´s right – the chart could not even fit the whole parabolic move in the output. And then? As fast as it had increased it collapsed again! What happened afterwards though is interesting. As you will see later, this pattern offers one to buy into a rebound as well. At day five of the collapse SINO decided to go the other way and it spiked. This spike may not look that significant on the chart. However, make no mistake! This was basically a spike from just over $3 to around $5.5. I would say that is significant!
Let´s look at the very recent example Cannabics Pharmaceuticals Inc. (CNBX), a biotechnology company related to the medical use of Cannabis. How does the chart look like? The stock went from $1 to $7.5 before crashing. And again, there was a nice bounce of more than 100% before the stock faded downwards.
Let´s look at the next one! Is this a copy of the previous one? No, not at all! This one belongs to Mentor Capital Inc. (MNTR) a private equity firm! Again, the stock skyrockets, crashes, has a short bounce and then starts fading away.
Next! eMedia Corp Inc. (EMMD) is different in the sense that the up move was more gradual and took longer. This is because EMMD is a pump whose stock price moved upward since paid promoters were sending out e-mails “recommending” to buy the stock. But what do we have? Spike, crash, rebounce and soon there will be a fade.
Airbone Wireless Network (ABWN) – another pump. What happened? You know the pattern by now!
So why do I mention this pattern now and more importantly did I trade this pattern? It always easy to talk about stuff if you do not have skin in the game. No, I did not trade this pattern yet! And yes, buying the upside, shorting the downside and buying the rebounce is very risky if one is not attentive and does not cut his losses. I wanted to write about this chart pattern because currently there are two stocks which seem to follow this very same way!
The first one is Aurinia Pharmaceuticals Inc. (AUPH) another biotechnology stock (this sector is pretty hot at the moment). It recently more than doubled, gapped down this morning and seems to have its crash these days. If so, I would expect the normal partial rebounce.
Seconldy, Qualstar Corporation seems as if the uptrend is over and momentum has turned negative.
Will I play these two? Most likely no! Due to exams I won´t be able to day trade in the next two weeks (again, this guy is talking without skin in the game). But let´s see what happens to these two stocks and whether they can follow the pattern.
And don´t worry. I am sure the pattern will emerge very soon in the future again!