A Trader Journal

I came across this stock few days back. A recent IPO and then formed long base last few months. I think that would have been sufficient time to lose interest of crowds and enough time for value players to build positions. Since beginning of this year the stock started moving up. May be its fundamentals were improving or about to improve. I am not as such that much concerned with fundamentals.



Last few days this stock had strong move up and ran into good resistance (horizontal bar on chart). Added the move into resistance was a 3rd leg increasing chances it will likely have a down move. Anyway, coming up with reasons and writing about what happened is easy and as such not useful except to those who make money by selling words and services.

So what's next?
Given the size of the base, base stage and the nature of price action inside the base, my current assumption is stock will likely have an up move even though it had big drop. I feel the circle on the chart is a low risk zone to enter longs. (A low risk zone for me is that area on chart that requires small stops and takes very short time for position to go into positive. The down side of it is higher chance of missing moves. I am OK with later.)

My assumption currently is the stock might reach that circle on chart in two ways - (a) come straight down to there with a bit of stall in between or (b) bounce up a little to test the high of the gap and then come down. Will see how it works out next few days.

One general area of concern (and this applies to all longs and not just SODA) is the current market behavior. Market is in a low volatile low volume up trend for some time and that doesn't give lot of confidence. If market becomes weak next few days, my preference is to not bet against it i.e., either pass on longs or take long positions (if setup is really good) but be aggressive till position becomes break even.