By: Jeff Cooper
Hit and Run Morning Stock Report: January 10th, 2023
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Actionable Trades: The Benefit of Belonging To The Hit and Run Private Twitter Feed
On Monday, the Hit and Run Private Twitter Feed flagged what threatened to be a false breakout in SMCI.
A daily SMCI from October shows the uptrend that started with a Key Reversal Day/Gilligan buy combo buy signal.
A Gilligan is a gap to a new 60-day low with a close at/near session highs.
Taken together the two signals opened the door for higher prices.
“Higher prices” turned out to be a runaway move defined by no more than one to two days against the trend-- up until its November 22 ATH.
I connected the Nov 22 high with the Dec 13 high (purple trend line).
SMCI broke out above the trend line; however, trade back below suggested a false breakout.
False moves lead to fast moves and a 10 min SMCI below shows the ensuing free fall back to Monday’s open gap and the rising 20-hour moving average.
The reversal provided 3 consecutive hourly lower lows. Consequently, 2 consecutive higher hourly highs will put SMCI in the hourly Minus One/Plus Two hourly sell position.
If this scenario plays back on a retrace that backtests the red or especially the purple “breakout” pivots it will offer a solid risk/reward short setup.
In sum, SMCI rallied nearly 100% in just shy of 90 days/degrees spelling out solid time/price resistance and making the “breakout” suspect.
The suspect was proven guilty as Price is the final arbiter.
Checking my Square of 9 Wheel shows that 360 degrees up from the 50.28 October 13th low is 83.
A 90-degree “throw-over” is 93.
SMCI reversed with authority after striking 92.80 on Monday.
Theoretically, it could trade down to 83 and still remain in a strong position; however, below 83 opens the door to a full-fledged downturn.