How To Dissect A Top In JMIA
All trading is contextual.
Whatever tool you use to determine the trend or to gauge a setup does not exist in a vacuum.
It is best to use several methods to arrive at the Line of Least Resistance.
For me the four most valuable factors in pinpointing setups are:
1) My Swing Method, based on the 3 Day and 3 Week Charts
2) The Principle of Squares as reflected by the Square of 9.
3) Moving averages
4) Pattern
Let’s take a look at JMIA.
From a low on November 10, JMIA at 11.70, JMIA exploded to 69.89 on February 10.
It was a classic Climax Run, a 90 day/degree blow-off.
At the February 10 top, JMIA left a stealth Lizard sell signal.
This is a strategy I created in the mid-1990’s in my Hit & Run books that does a good job of defining turning points. Sometimes these turning points can be reactions, sometimes there mark major highs (as was the case with JMIA in Feb) or lows.
A Lizard sell is a new 10 day high with the open and close near session lows —essentially a 10 day Topping Tail
A Lizard buy signal is a new 10 day Botting Tail.
When these occur at new highs (new lows), following a strong advance (decline), it often times represents exhaustion.
From 59.89 on February 10, JMIA has dropped more than 50% in 7 weeks.
Hit & Run members took JMIA short several times during its decline.The last instance was on an intraday alert on March 22.
On that day, JMIA was set to leave an NR 7 Day (the narrowest range in 7 days). These contractions in volatility are typically soon followed by expansions in volatility. Since JMIA was in a weak position below its 50 day line and its declining 20 day moving averages, there was a strong likelihood that the presumed expansion in vol pointed to lower prices.
Notice the backtest of the 50 and 20 day m.a.’s in mid-March carved out a potential right shoulder putting the wind at our back for the short-side setup.
Checking the Square of 9 Wheel shows that 360 degrees down from the 89.89 high is 41.
Consequently, breakage below this important 360 degree region opened the door to lower.
The presumption was a drop to the 29 region which represents 540 degrees (1 and ½ cycles) down from the all-time high.
Red is 70
Purple is 29
Blue is conjunct 70 in early March, the initial low.
Remarkably, 2 and ½ cycles or 900 degrees up from the 11.70 low is 70 which nailed the all-time high.
This is the power of the Square of 9 Calculator.
Purple is 11.70
Blue is 70… straight across and opposite 2 ½ cycles/squares around.
Sound like voodoo?
Sir John Templeton, who is regarded was the greatest global stock picker of the 20th century, revealed that one of hi9s investing secrets was following stock price fluctuations as proportional to the square root.
This is what W.D. Gann called the Principal of Squares, the Square of 9 Wheel.
It maps the market.
Hit & Run members scaled out of some of their short position as JMIA tumbled leaving us with a 1/3 short position which we were up over 8 points on at Monday’s close and have continuously lowered our protective stop.
This morning it’s being pumped by a firm by an analyst who says he ‘still likes JMIA’ and still owns it.
He still owns it although it dropped more than 50%?
The basis of my Hit & Run Method is Buy, Hold & Sell.
Change happens fast. There is nothing worse than watching profits on a stock you fell in love with go to money heaven.You have to have a method that keys off the numbers and the patterns to keep you from becoming emotionally involved in a stock.
In sum, despite this morning’s pop, JMIA appears to have an agenda to the 29 region.
This represents an undercut of the March 5th reversal bar (a Lizard buy signal) that had a low of 31.42.
So this morning’s rally should fluff up JMIA like a turkey sitting on a fence for another shot at a short.
99.999% of traders have never even seen the Square of 9... let alone understand its potential.
Do you dare to be different?
