$KAHOT in the rearview mirror

KAHOT

This here is the >100% swing move in which a fellow trader missed the opportunity to engage. He made a great trade before this period and exited right at the gap up around october 5th 2020 unable to reenter/reposition for the ensuing 150% move.

Let’s turn around and take a closer look…

The initial situation

Selling on the gap up from a quiet 4 day shelf is rarely a red flag where you would exit. But maybe there was little size left at this point. So the stock continued to runup for 5 days before starting a pre earnings pullback. Sitting through earnings would have been a prudent move.

On the hunt for an entry

On earnings day the stock fared well and held the prior gap up lows. A rally ensued on low volume which then failed with a bang on november 9th. However take note that price recovered all the way to the lower limit of the volume zone. This isn’t bullish as stocks often do that just to get rejected at the overhead supply aka PLL above. KAHOT managed to reenter the PLL. The rally attempt above it failed via a bearish outside reversal day. However the reversal found quick support inside the PLL zone. Over the next 5 days volume disappeared as the stock sets up properly via a #QTS inside the PLL zone, above the actual PLL and 10d MA. That’s a textbook #QTS entry right here on the right side of the chart.
While the chart looks scary, with the two big red candles, the important information is that it never lost support for good.

Instant gratification

Fast forward to mid december 2020. Stock launched higher from the #QTS entry. Left the sharper inside PLL zone and approached all time highs (ATHs). It continued to trade in constructive fashion and even provided a ‘late comer’ entry when it pulled back into the 10d MA on relatively low volume. 10d MA acted as a launchpad for the Pocket Pivot on december 11th. On december 14th the stock broke out into the unknown on monster volume. It triggered the 10% scale-out rule for a first time right there.
With a sharp #QTS entry and a proper first scale-out in place one is in a very good position to sit tight.

The first swing move

Stock blasted higher way above the 10d MA. Crazy strength on display. It rallied all the way into the century mark at 100$ in a straight line. A pullback here is likely. You know that I see this as a perfect opportunity for realizing some profits via follow up scale-out, right? 1h chart of that swing from 68$ to 100$ reveals that it went perfectly exponential by adhering to a clothesline on the log chart. Right above the century mark it overshoots the clothesline for a first time. This info isn’t needed to pull the trigger on the century mark scale-out but it is a nice confirmation.

Fortify the trade & first signs of exhaution

Stock flashed a ugly bearish outside reversal day. But volume wasn’t excessive and price didn’t even reach the 10d MA. Without the prior scale-out into strength it would have been tough to sit here and in that case a little sell would have been a prudent move. Recall that such pullbacks oftentimes occur around century marks.

The stock never challenged the outside reversal lows and continued to resolve to the upside. 10% rule was triggered here on the ATH move. As this would be the third scale-out I am not really inclined to pull the trigger here already. With two prior scale-out you are in a very strong position and shouldn’t be trigger happy anymore (Thats the whole idea of the scale-outs after all). Let the market do it’s magic.

Another 10% pop into the clothesline! Nothing to do if you scaled-out some the day before. If not then I would feel a strong urge to place my third scale-out right here! Be aware that the stock advanced 100% from the correct entry already. It doesn’t get better than this to be honest. Every year in which you are able to score a >100% swing move is a good year.

Sit tight and watch out for red flags or proper entries

Stock showed huge volume on little to no price progress. While there are always reasons/news for this one needs to understand that IT IS WHAT IT IS. Huge volume without any price advance. This would raise my alertness.

Stock broke out again from the little base but volume isn’t on breakout level yet. Maybe the next day volume will come in? If someone missed the prior scale-outs and managed to sit tight then this here would be the third and therefore final 10% rule scale-out!

KAHOT broke down through the 10d MA after failing on the last little breakout. So in hinsight that monster volume spike was surely exploited by big operators to start unloading their positions. Stock closed below the PLL. A failed breakout followed by a break off the 10d MA which acted as support on the way up after a 150% swing move can be enough to run for the exit.

The clear exit

2 days after the 10d MA break on January 27th the stock opened strong and tried to rally into the pivot and 10d MA from below. After the first hour of the session it reversed and dropped through the complete PLL zone within the next 3 hours. The undercut of the January 25th low cemented the 10d MA violation and was the clear red exit flag at the 112$ mark.

Conclusion

This was a textbook swing move where my techniques actually worked flawlessly. I am not sure if the trader who requested this analysis picked it for that reason. Anyway, a textbook swing trade with a well defined and easy to spot QTS entry (3 days to establish a proper entry!), logical scale-out levels and a clear red flag exit.

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