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Identifying a change of character or shift in momentum in a stock helps me identify potential opportunities.

I recently wrote about identifying a change in character and what it might look like.

One such sign is a trend break. Yesterday, a penny stock trading abnormal volume experienced a significant trend break on a higher time frame.

A break of a stock’s trend might signal an immediate change in direction and momentum. Therefore, when I encounter significant trend breaks, I look to dig into the stock and arm myself with crucial support and resistance levels.

Waitr Holdings (WTRH)

Since the start of the year, shares of WTRH have been in a steady downtrend. The stock, up until yesterday, had been consistently trading below key moving averages and the resistance of the downtrend.

The 200d, 50d, and 20d Moving Averages have all acted as resistance to the stock, along with the resistance of the downtrend.

Per Finviz, year to date, the stock is down 54.32%, down 62.20% over a year, and up 54% on the week, thanks to yesterday’s breakout.

Before I take a closer look at the breakout and what could be next for the stock, let’s first look at the company.

What is WTRH?

According to Yahoo, Waitr Holdings Inc., together with its subsidiaries, operates an online ordering technology platform in the United States. Its Waitr and Bite Squad mobile applications (the platforms) provide delivery, carryout, and dine-in options, connecting restaurants, drivers, and diners.

As of December 31, 2020, the company had approximately 20,000 restaurants, in 700 cities, on the platforms.

The Catalyst for the Breakout

According to MarketWatch, Morgan Stanley disclosed that it had taken a 10.3% passive stake in the company. In a filing with the SEC late Tuesday, Morgan Stanley disclosed that it owned 12.13M shares of Waitr stock.

Market Cap: 155.12M

Float: 107.81M

Short Interest: 15.77%

ATR: 0.10

Average Volume: 4.65M

Let’s take a closer look at the breakout yesterday:

The range of the downtrend had considerably contracted. Often, the range of a stock might expand greatly after a significant contraction. One might refer to this as the Rubber Band Effect.

The stock has an ATR of $0.10. However, yesterday, after experiencing the technical breakout and sharp increase in volume, the stock’s range more than doubled intraday.

The volume yesterday was enormous, relative to the stock’s average volume. Yesterday, the stock traded just over 170M shares, far more than the average volume of just 4.65M.

With the range expansion, increase in volume, and significant breakout above critical resistance, the change of character in the stock might be confirmed. It might also signal that further momentum to the upside is probable.

What’s Next for the Stock?

As I have often said, no one knows whether a stock might go up, down, or sideways. As a trader, my job is to arm myself with the available information, conduct technical and fundamental analysis, and then prepare IF/THEN statements to react to price action and make sound decisions.

From day one of the move, three critical levels now stand out to me.

$1 is a significant level of support from now on. The stock found support in the pre-market at this level. Therefore if the stock pulls back, the bulls might want to see this level firmly hold to have sustained confidence in the stock.

$1.10 is another significant level of support as the stock found support in this area twice yesterday. $1.10 will be a substantial area of interest in the future as all of the volume yesterday was traded above this level. Therefore, the bulls might not want to see the stock hold below this level, as it could signal a short-term character change.

$1.30 – $1.36 acted as critical resistance yesterday on numerous occasions. A breakout and second leg higher might be confirmed if the stock can turn this level into support and break higher.

Author: Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.

Yesterday was a fairly uneventful day in the markets, with the SPY closing down 0.25% and the Biotechnology ETF IBB closing up 0.12%.

While some of the most spoken about Biotech stocks, such as MRNA and PFE, failed to show relative strength yesterday or close strong, one Biotech stock led the way with a strong performance.

Ocugen (OCGN) finished the day up 18.47% and traded over 100M shares. Yesterday’s action in the name saw the stock trade more than six times its average volume.

The action yesterday also saw the stock gap higher and close strong. In doing so, the stock broke out of a long-term consolidation seen in the daily chart above.

Shares of OCGN are up 397% year to date and 31.46% on the week.

What is OCGN?

OCGN is a clinical-stage biopharmaceutical company. The company operates in the Biotechnology industry and is headquartered in Malvern, Pennsylvania.

The stock had breaking news yesterday, which resulted in an impressive move.

It was announced that an expert panel of India’s drug regulators had recommended Bharat Biotech’s COVID-19 vaccine, Covaxin, for children between the age of two and 18.

Ocugen has a partnership with the Indian-based company Bharat to commercial Covaxin in the United States and Canada.

OCGN key stats, from Finviz:

Market Cap: 1.82B

Float: 193M

Short Interest: 27.38%

ATR: 0.57

Average Volume: 14.78M

The news resulted in a significant technical breakout yesterday. $8 was the downtrend’s resistance, seen on the daily chart, which cleared yesterday. This level will now need to act as support if the stock is to continue higher.

Two other critical levels of resistance from the daily chart stand out to me. $11 and $13 might act as significant resistance if the stock gains momentum to the upside.

Three key levels stand out to me from yesterday’s action.

The opening low from yesterday is $8.01. At this level, yesterday, volume increased, and the stock began its impressive move higher. This level also coincides with the higher time frame technical breakout level. Therefore, from now on, the bulls might want to see the stock hold firmly above $8.

The second key area of support from yesterday is $8.70 – $8.80. The stock spent most of the day consolidating over this area. A large portion of the day’s volume was done above this area, and therefore it might be necessary for the stock to remain over this area if it continues its move higher.

$9.50 is a significant level of resistance. The stock topped out at this level in the pre-market yesterday and then faded back to $8 before the market opened. In the afternoon yesterday, the stock again found resistance at this level and pulled back into the close.

If the stock can turn $9.50 into support and base above this crucial level, it might signal that a second leg higher is on the cards.

The 27% short interest is undoubtedly another attractive selling point for the bulls. However, the stock has a decent-sized float of 193M shares.

Therefore, unlike some of the penny stocks I have recently written about, a significant move higher together with increased volatility might not be too likely to happen. Instead, patience might be required as stocks with larger floats typically move slower than stocks with small-micro floats.

Author: Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.

Earlier this month, I wrote about Progenity (PROG).

The stock perked my interest after it traded heavy volume and closed the day up 40.74%, on no apparent news.

That change of character resulted in me taking a closer look at the stock.

I previously identified vital support and resistance levels and outlined a potential bullish case for the stock.

I outlined $2 as a critical level of support and noted that it would be necessary for the stock to hold above this level.

Fresh news was later released, which resulted in a breakdown, and the stock traded below critical support for multiple days before reclaiming $2.

So, could the false move lower quickly result in a move higher?

Let’s take a look.

First of all, what is PROG?

Progenity is a biotechnology company that provides, develops, and commercializes molecular testing products in the United States.

The stock is up 109.80% this month and down 59.70% year to date. Yesterday, shares of PROG closed the day up 58.52%.

Since bottoming out at $1, the stock has impressively bounced over $2. During that time, the share price has more than doubled in a month. On a higher time frame, however, the stock is still in a downtrend. That downtrend explains the -59.70% return year to date.

Key Stats from Finviz:

Market Cap: 319.74M

Float: 20.98M

Short Interest: 42.15%

ATR: 0.26

Average Volume: 23.46M

 

When I first wrote about the stock earlier this month, shares of PROG were trading above the critical resistance of $2.

That level marked resistance of the downward trendline.

The stock, however, was not able to hold firmly above this level of resistance due to breaking news.

On the fourth of October, PROG announced a $20m direct offering of common stock, priced at $1.50.

The news sent shares of PROG much lower, and for the next four days, the stock traded below resistance on light volume.

However, yesterday, PROG brushed off the $2 failure from last week and the announcement of the offering and bounced back sharply.

The action yesterday has once again resulted in a potential squeeze higher setting up.

First of all, notice how the volume sharply dropped off when the stock traded in a tight range below $2. Then, as soon as the volume increased yesterday, the stock gained momentum and broke above critical resistance. This might signal strength and the potential for a short squeeze. According to Finviz, the short interest is over 42% in the stock.

For four consecutive days, $1.50 stood firm as the level of critical resistance. Yesterday the stock broke through $1.50 on increased volume and held above. This was the first indication of a reversal and move higher in the stock.

The next level of resistance was $1.80. Like the price action experienced at $1.50, the stock broke above and held above this crucial area.

Shortly after that, the stock broke above $2 and highs from the beginning of the month. Significantly for the bulls, the stock closed above $2 and the previous high.

What’s Next for PROG?

The recovery in PROG yesterday might signal that a move higher is highly probable. The short interest in the stock remains high, and the stock is now firmly trading above critical short-term resistance levels and a higher time frame technical breakout level.

If the stock can base over previous resistance, turning into firm support, it might experience momentum to the upside and squeeze shorts.

$2.50 – $3 might become the new levels of resistance as the stock continues to advance.

After breaking above yesterday, bulls might not want to see the stock break below $2 and held below.

The final line in the sand for the bulls might be between support levels of $1.50 and $1.80.

Author: Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.