A friend of mine just asked me if I knew the reason for the steep drop in BOT today. I told him that I didn’t see any news/chatter on it but that the chart looked toppy to me. He asked what I meant by ‘toppy’ so here’s the chart to explain what I meant:
Here’s where candlesticks can save, if not make, you a lot of money. Yesterday’s candle was a doji, which shows confusion and/or a stalemate between bulls & bears. It warns of a reversal. The long upper wicks (shadows/tails) on Tuesday and Wednesday show selling pressure. What’s more, those sellers stepped in at the all-time high, where you also see long upper wicks. The other toppy thing that sticks out to me is the fact that the stock was above its upper Bollinger Band.
None of those things would necessarily make me short the stock but I sure wouldn’t have bought it so close to resistance and with all those warning signs. And if I was already long I would have been thinking about locking in some gains. My guess is that today’s action was (long time) bulls snatching profits off the table. The true test will be if it can hold support around 115.
P.S. While annotating the chart I realized that the broken January to February trendline had become resistance. I’ve written about that phenomenon before and it’s why I like to keep old trendlines on my charts after they’ve been broken.
