In Retrospect: BPC

BPC

BPC broke out of the inverse head and shoulder formation. However, the breakout volume in my opinion was not large enough. The upward move without a large volume means there is a lack of buying sentiment. There would come a point when those who are bullish with this stock become depleted and there will be no one else to buy this stock and of course, will naturally cease from moving further up.

On further analysis of the inverse head and shoulder, I think I may have made a mistake in the interpretation of the right shoulder. Inverse head and shoulder should have light volume on the right shoulder’s decline, but the chart indicates that there was increase in volume in the right shoulder formation. This became obvious to me after overlaying the OBV chart against the price.

At point 1 to point 2, we could see the formation of the head and volume is increasing as evidenced by the upward movement in the OBV line. What went wrong with the inverse head and shoulder is that the decline towards the formation of the right shoulder should happen with a lighter volume; however as what can be seen in the OBV line is that it went lower than the point where the head was, which indicates further intense selling during the formation of the right shoulder. This I think invalidated the inverse head and shoulder formation which is currently confirmed by the low breakout volume.

These are the things to watch out on the succeeding days: 1) Watch out for the price level 4.20-4.30 acting as resistance, this is the 38.2% Fib retracement and also the 130 day MA. 2.) Watch out also for previous resistance line (at 3.70-3.80) which is now the support line. Because there is a lack of volume on breakout, the price may re-test that line and if there really is no further buying sentiment, the price may eventually break below that line. 3.) If price moves below that support line, watch out for the previous low of 3.25 as the next major support line.