What a week it has been. This week is certainly one to remember, one to review and study.
The increase in volume, opportunity and volatility in small-cap stocks has been impressive.
As you might have gathered from my recent articles, or even more so if you are a member, I like to be prepared each day with a watchlist of stocks.
Having a watchlist of stocks that are forming good patterns and setups allows me to react quickly if my plan materializes.
Lately, I have had and written about some successful trades. Some of these trade ideas were first on a watchlist, shared with members, and only later materialized into trade opportunities.
There is, of course, no guarantee that a stock on a watchlist will materialize into a successful trade.
The Watchlist is just that, a watchlist. Over time, if the stock continues to confirm the bullish pattern and meet certain conditions, then a trade might set up.
Meten Holding (METX)
METX is up 86.78% on the week, after closing up 44.34% on Thursday. The stock recovered well after fading off on Thursday and closing near the low of the day.
METX, according to Yahoo, provides English language training (ELT) services in the People’s Republic of China. It operates through four segments: General Adult English Training, Overseas Training Services, Online English Training, and Junior English Training.
Market Cap: 82M
Short Interest: 5.06%
Average Volume: 47M
The stock has traded an average volume of close to 517M shares over the last four trading sessions. That’s a significant increase in volume, considering the stock has an average volume of 47M.
This stock is on my Watchlist for Friday mainly due to the price action on Thursday.
The stock spent the better part of the day consolidating below $0.50, with volume steadily decreasing.
Then around 2 pm, the volume increased, and the stock traded higher into the close, ultimately finishing the day up 44.34%.
That close and increase in volume grabbed my attention, so I placed the stock on my Watchlist and took a closer look.
In the future, I will be looking to see if the stock can trade back towards resistance from earlier in the week, which is at $0.70.
If the stock fails to hold the breakout area from yesterday, $0.50, I might take this off my Watchlist.
If the stock can trade to the critical resistance area and turn resistance into support, it might have another leg higher.
SOLO, according to Yahoo, is a development-stage company that develops, manufactures, and sells electric vehicles in Canada. The company operates in two segments, Electric Vehicles, and Custom Build Vehicles.
Yesterday the stock closed up 13.98% and experienced an increase in daily volume. The stock traded close to 12M shares, compared to its average daily volume of 2.34M.
In trading higher yesterday, the stock confirmed one of my favorite technical setups: the W pattern.
Now I might not make a trade in this watchlist stock, but I thought this presented a solid opportunity for a lesson to be shared.
The W pattern forms when you have a stock that has a double bottom. You have a starting point on the left side, the first bottom, the midpoint, the second and double bottom, and then a move higher again.
Notice in the chart above how the W shape has formed on the daily chart.
With a W pattern, once the double bottom has been confirmed and the stock begins to trade higher, I like to use the starting point as a potential profit area.
For example, $3.95 was the starting point of the W pattern formation in SOLO. Therefore, I might look for the stock to reach that area and for that area to act as potential resistance.