Anyone finding interesting setups in small caps this earnings season?
These often have more reliable patterns for swing trading. Since they are largely under the radar of the retail crowd, institutional patterns can be clearer.
NASDAQ:CERE is an example of a stock coming up in TechniTrader scans today. It has 88% institutional holdings. A compression pattern is developing. HFTs have been in it recently, possibly due to intermittent accumulation. The strengthening of the sideways action is particularly visible with the RSI indicator.
Dark Pool accumulation tends to cause controlled sideways patterns like this, a key ingredient for what we call Relational Technical Analysis at TechniTrader.
Because this has had a swing-style run out of the last compression pattern at a low in this longer trading range, a swing trade could be considered on the breakout, either above today's high or above the last resistance level for a more conservative entry. (Green lines on the chart) My target would be 31, but of course I'd be watching for exit signals or an extreme pattern to take profits early. Stop loss at the red line on the chart.
A more aggressive trader could look at an entry ahead of the close today if pro trader patterns emerge in the last 15 minutes with an exit shortly after the open if a run or gap up develops for an EOD to FOD trade.
Happy Trading!
Guest author: Mele Ainuu, Senior Technical Analyst, Student Support @ TechniTrader
Hello Mel. Please would you explain your proposed entry? You say "could be traded". Would you not already be in this trade with the candlestick of the 1st of November being the signal? Also, how would your risk/reward work in this instance? With a PT at 31 and stop at 22, but entry would be over 27. You refer to a "more conservative entry" above the last resistance level. What price level would that be? Thank you.