01/19/2022
“Where’s the volume?”
That’s been the question for many traders and also what I’ve been asked the most over the last month…
Starting in mid-December, volume tends to nosedive and it’s not until around now that things pick up again.
This is well documented on both the NASDAQ and NYSE…
But this seasonality of volume can make this time of year particularly great for buying low-risk bottom plays.
How do you know if it’s at a bottom?
You don’t.
Stocks base out for months and still shift downward all the time. You just have to use the clues around you to decide if a reversal is on the table and manage the risk…
It’s been a while since I looked at this chart, but Aterian, Inc. (ATER) is worth checking out:
Above is the daily chart going back to February — a time when small caps woke up to sunny skies, birds chirping, and overjoyed retail traders talking about “lambos”…
It might be hard to believe, but ATER was trading just shy of $50.00, much higher than the low $3.00’s we’re seeing now.
Will it make its way back to previous highs?
No idea. But it may get at least part of the way there…
This is a stock that came on strong in September due to a wide recruitment of social media influencers and meme stock enthusiasts looking for a short squeeze…
They did a decent job, but the stock is right back to where it was.
That’s the key here.
The ~$3.00 area is the most recent support level as you can tell from the green horizontal line.
Above it, I’ve drawn a red horizontal line in the ~$19.50-$20.00 range to illustrate where resistance is located given the previous two rejections noted by the highlighted bubbles…
What’s notable is that the 200sma (green) was trending closely at each point.
After being shorted back down, you can see that the share price is settling at the previous “pre-pump” level with little to no volatility.
The Bollinger Bands (purple) have closed in tight and the ATR (average true range) is the lowest it’s been over the last year…
The stock will soon make a decision: Squeeze to the upside or break support?
The lower chart is a mixed bag with volume considerably down. However, the MACDand RSI are showing some relative strength when considering the price action…
If the share price holds at support, watch for a strong cross above the 20sma (red)on volume for a move towards the 200sma as a point of resistance.
Under $3.00, I’d watch for long-wicked tails and reversal patterns with volume before jumping in.
No volume, no dice.
Disclosure: I have no position in ATER.
Keep moving,
This material is not an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed, and is to be used for informational purposes only. Any performance results discussed herein represent past performance, not a guarantee of future performance, and are not indicative of any specific investment. Due to the timing of information presented, investment performance may be adjusted after the publication of this report. There can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this communication will be profitable, equal any corresponding indicated historical performance levels or be suitable for your portfolio.
