Charting PAA

PAA continues to be difficult to chart, yet here are some insights from this novice.

Conclusion: The chart expects a moderately sharp move to the upside or downside by middle of next week, yet due to relatively low liquidity of this stock, it might just bubble along sideways until next move.

Early last week we predicted a gap-fill at 21c and some of us (including myself) predicted a bounce off this level, which despite an initial bounce, did not continue. Depending on one’s stop loss (ie. Anything above 19c) a cold nosed trader may have packed up and moved on as the thesis failed to follow on.

Fast forward to this week’s rear vision mirror and we can see on the 1 hour chart that there has been very little volume traded below 20c and 21c remains a bit of a price magnet.

This week’s price action is contained in the orange triangle. On the topside sellers have been more willing to sell at lower highs, and to a lesser extent buyers have been willing to buy at higher lows (or at least they are stepping up at 20c – I could have drawn this triangle with a flat bottom at 20c, but it is important to note the incremental willingness of buyers to enter at 19c then 19.5c and now 20c as they see value)

The triangle is tightening! Volume is decreasing (red line at the bottom where the volume is) This shows the difference between buyers and sellers is decreasing, the market is looking for direction!

Trendline support (blue) has not been challenged, yet it is conveniently converging with the pointy end of the triangle. SP tends to bounce off or go crashing through trend lines. This is only a short-term “weak” trendline, but is still poignant when considered alongside the triangle.

This is all coming to a head over the next couple of trading days. We are running out of triangle fast and the trendline is upon us people!!! Bollinger bands continue to tighten (not shown here so as not to clutter the chart)

Will the chart conform and give us a move around Tuesday/Wednesday? Or will it just keep sliding sideways waiting for the next morsel of info to hit the newswires? (making a complete arse of the author in the process) NB. A sideways move until the next news is still quite possible (in a more liquid stock, traders might pre-empt the move, tipping the thesis into action, but PAA simply doesn’t have enough players for that IMO) Any such sideways move would likely follow the trendline gradually higher, there are still 9,050,000 unlisted options out in the wild, so if these are still being unloaded then 20c to 21c might still be the range.

The smart advice would be to wait for the SP move to confirm the next leg up (or down) before buying or selling.

My opinion: She is wound up like Rodney Eade and is ready to pop (so long as those pesky option holders don’t keep feeding too much stock)

DYOR and never allow old seafarers to perform casual dentistry on you