Golden Agriculture gapped down and sank rapidly, hitting a low of 52c on heavy volume. Impressively, it closed at 54.5c, forming a white hammer in the process! A white hammer appearing after a series of down days is usually promising. We might have a reversal next week. We will need confirmation in the next session.
MFI, a momentum oscillator, is declining and almost at the 50% mark. OBV is still in decline which suggests distribution is still very much alive. Despite a lack of buying momentum and accumulation, price action managed to form a white hammer. This suggests some strong underlying support for the counter: the selldown was well absorbed.
As is my style to buy at supports when prices are moving down in an uptrend, I put in a buy queue at 54c, which I identified as a gap support, last night. Of course, it was filled. My other queue at 51.5c was not filled. Missed by 0.5c. Sometimes, hedging by queueing at one bid above support could be rewarding.
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3 comments:
Hi!
Congrats for your bid. If I am right, the 51.5c support is determined by the rising MA50d. But can you kindly enlighten how was the 54c gap support obtained? And what determine if the support at the price is strong or weak?
Thanks in advance.
Hi Zac,
51.5c is a gap support, just like 54c. Yes, 51.5c also coincides with the rising 50dMA.
Borrowing from Investopedia: A gap is "a break between prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between."
Gaps are usually psychologically important. So, where they occur, we will find supports as price retreats or resistance as price advances.
How do I determine if a price level is going to be a strong or weak support? One way is if I find a confluence of more than one supporting technical at the same price level, that is likely to be a strong support. Same for resistance. I hope this is the answer you are after. :)
Thanks a lot!
Your answers have been really helpful.
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