Yesterday we posted a video about how to use long term moving averages in short tern trading using SHOP as an example.
Basically, when a stock successfully backtests its 50 day line after recapturing it, it is in a stronger position to rally.
Moreover, when an item has reclaimed its 50 day line after carving out a base such as a W Bottom, it underscores the potential of a rally phase.
This is the picture SHOP was presenting over the last week.
On November 26, SHOP exploded from a little flag pattern above its 50 day moving average.
Monday’s sell day in the market saw SHOP backtest/undercut its 50 day.
As a 10 min SHOP shows, on Monday, December 2, buyers were waiting.
These are likely the same accumulators who took SHOP above its 50 day line.
Often stocks strike first hour lows when they are under accumulation and first hour highs when they are under distribution.
Note the complete reversal to the topside on December 2.
On December 3, the market gapped lower on more trade tensions.
However, note how SHOP struck a low from the get-go. Following another brush of its 50 day m.a., SHOP exploded after triggering an up ORB. An ORB is an Opening Range Breakout, a breakout above (or below) the first 30 mins range.
SHOP went into overdrive late Tuesday (December 3) when it came out of a Stein & Handle pattern on the 10 min chart.
As offered in yesterday’s video, SHOP’s breakout put it in a strong position to attack all-time highs.
Tuesday’s rip was recognized by the street and players piled on Wednesday morning with a first 10 min rally of a stunning 15 points.
Another ORB saw SHOP trend higher until mid-session, SHOP left Train Tracks (on the 10 min basis).
SHOP is stretched short-term and looks like it could consolidate a 2 day, 55 point run.
Checking my Square of 9 Wheel shows that 360 degrees up from the recent 282 low is 355.
SHOP has obviously cleared 354.
Often stocks in runaway moves will see a 90 degree throw-over before a pullback.
450 degrees (the 360 + 90 degree possible throw-over) gives 373.
A full 540 degree cube-out (versus a square-out) is 393.
393 ties to the final pivot high in September prior to SHOP’s big slide.
As you can see on the Square of 9 below, 393 aligns with/points to December 12.
Purple arrow is 282 with 354 one square above
Blue arrow is 393 (a full cycle of 360 degrees plus another 180 degrees up from the 282 low)
The green arrow is December 12, which all these levels align with.
December 12 sets up as a turning point in SHOP — especially if it has spiked to 393.