MyTradingJournal

Price action & Psychology - Possible first pullb. after breakout

NYSE:MAXR   MAXAR TECHNOLOGIES INC
Hello !

Key points :
  • The double bottom ignites the breakout
  • Strong breakout, wide candles + high volume to confirm it
  • Breakaway gap, psychological shift
  • Significant support zone (left side of the chart in light blue)

Here we are trading another first pullback after breakout pattern. I personally do not short, but this could be a decent short setup from here.

The focus here, is on the pullback. As we can see, the double bottom ignites the breakout from the that trading range.

On the left side of the chart, we see that confluence zone, which kept being an important level while the stock was trading in a range the last few weeks.

The breakout is strong, it is made of the 2 wide range candles. Notice on the second candle, the rejection, considering the lower wick, we can assume that some people sold, but clearly got caught up because the momentum was way too important.

Also, the breakaway gap, signals a shift in people's conviction about the stock. If people are willing to bid higher in pre-market, they must have the conviction that the stock is cheap.

Now, we know that whenever a stock breaks out of a trading range with such a momentum, it must retrace. What causes this retracement are breakout and momentum traders taking profits.

On the left side, circled in orange, you can see that "unsignificant" gap. What I started noticing is that often times stocks get rejected from such gaps, i.e they act as a resistance.

What I expect the stock to do within the next few days :
  • Maybe some upside today caused by too optimistic people (PS : It's already up a few points pre-market)
  • A drastic decrease in volume
  • A move to the downside
Usually, such pullbacks retrace halfway from the breakout. I'll start monitoring lower timeframes once prices come down around the 61.8% or 50% Fibonacci. I'll swing the leg up and start scaling out at the swing high.

Thanks for reading and if you have suggestions or want to discuss the idea, just leave a comment, I'll be happy to answer.

PLEASE, if you got any VALUE out of this analysis, make sure you hit the LIKE BUTTON. Thank you !

***Disclaimer : This is not an advice to buy the stock. Please, be aware that trading is a matter of probabilities and that it only takes ONE trader to deny your trade.***

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