If history is any indication, than roughly half of you are about to hate me for what I'm about to say regarding Fab Universal Corp. (NYSEMKT:FU), while the other half of anyone reading this will likely love me for it - there is no in between. Here goes... FU is poised to make a fairly significant pullback following last week's heroic rally.
If you hate me for saying that, let me ask you one question. Do you actually own FU shares at this point? If you do, then you're biased (in favor of bullish commentaries, and against anyone that might pull the rug out from underneath the stock). If you love me for having the guts to point out how this crazy market carried Fab Universal Corp. shares upward too far, too fast, last week, then you probably saw the same red flag on the chart that I saw.
And what's that? Over the course of Thursday and Friday of last week, the Fab Universal Corp. chart gave us what's often referred to as a traintrack reversal, which is a pair of bars where the first day is marked by an open at the low and a close at the high of a very tall bar (and a bar that's usually at the tail-end of a sizeable runup). The second bar of the traintrack reversal is a mirror image of the first bar, with an open at (or at least very near) the first bar's close, and a close at (or very near) the first bar's open. We got a near-perfect case of this with FU over the last two days of last week.
The idea is, the two bars represent the proverbial last hurrah for the buyers, and then the passing of the torch to the sellers between - the market completely changes its mind (literally) overnight.
But FU is up today, quelling the bearish theory? Well, the stock is up today, but that doesn't inherently mean it's going to keep rallying here. The impact and meaning of the traintrack reversal has already taken its toll... is already out there. One good day now can't change that. On the other hand, never say never. We just want to give the chart and the bears at least a couple of days to find their bearings.
Top 10 Undervalued Companies To Buy For 2014
The bottom line is, with such a strong bearish reversal already under its belt, Fab Universal has already said the odds of a pullback are far greater than the odds of today's strength following through. It's possible FU could tumble all the way back to the low $5.00's before rekindling a more long-loved rebound.
Yep, timing is still everything.
For more trading ideas and insights like this, become a subscriber to the free SmallCap Network newsletter. It's chock full of stock picks, market calls, and more, FOR FREE! Sign up today.
No comments:
Post a Comment