Price action & Psychology - Resistance, consolid., continuation

NASDAQ:VRA   Vera Bradley, Inc
Hello !

Key points :
  • Resistance broken on high volume and wide range candles
  • Consolidation phase and support hold
  • Huge price rejection on the hourly + high volume
  • Relative strength (compared to today's market conditions)

I've left some charting from the previous trade on this analysis, to get a context. On the previous analysis, we said that basically, what happens after an "ABCD" pattern, is that the "D" makes a new low (depending on what chart you're looking at it must not be an all-time low). So we're entering a new trend. As we know, stocks nearly always move in waves (higher highs, higher lows when uptrending, reverse for downtrending).

What happens here, is that the stock needs some room to "breathe" before resuming the trend. Some people are taking profits (like I did yesterday), others are joining the party, while others wait on the sidelines.
BUT, there's still a "healthy" balance between the different actors, otherwise, if the conviction was gone or there would have been enough sellers to absorb the buy orders, the stock would have reversed right away.

The 2 reasons for a stock price (or any other security) to go up (reverse for down)
Fundamentally, there are 2 reasons :
  • There are not enough sellers to absorb buy orders (buyers > sellers)
  • Traders/investors think that the stock is cheap (they have the belief that the stock will go up in the future, i.e. the conviction)

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

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

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