Been a big 24hrs with potentially two of the most important events taking place as far as EUR is concerned.
The first event, which IMO is the most significant TA event in trading looks to have just been completed yesterday for EUR - the shakeout.
A shakeout is a break lower from range, which most would perceive as bad. Except this time the break through support is calculated and actually serves as a buying opportunity for Market Makers and smart money (lets just say MM to make it easier).
For those that aren't aware, most of the shares you see on both the buy and sell side can be one entity (or a few entities on bigger caps). The MM puts up both buy and sell orders to help with liquidity - which lets us buy and sell much easier.
However because the MM provides so much liquidity they also possess quite a bit of power to create such events as a shakeout for their own benefit.
Obviously they know how many orders are theirs on the screen which makes it very easy to calculate if dropping the sp to a target price will end up giving them a net buy or net sell total once the move is complete. They will also use technical levels and indicators to their advantage to maximise such a move.
By dropping a price by a certain amount or through a level of support they will be able to catch out quite a few different types of traders/holders.
Initially a shakeout will grab plenty of stop losses as the price hits just below support as this is an obvious area to set stops - this will catch beginners and pros. To add to the bounty this move will also catch any weak, impatient or over-leveraged holders.
One of the keys to a shakeout is the speed of the move. Obviously holding the sp down for an extended period will cost too many shares so its usually done anywhere from 1 day to 1 week.
A shakeout is usually the last changing of hands before a stock goes on a
significant run.
Heres where it gets interesting for EUR so lets take a look at the chart..
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Last Monday EUR dropped through a significant level of support breaching both its LT support and the 0.382 Fib level - initial stops hit - check.
Then Tuesday we saw a backtest on old support/new resistance and a violent drop after the back test. This would have flushed many of the smart operators and weak holders - check.
Then Wednesday we saw it gap down on open through the 0.5 Fib level that was seemingly support. This would have cleaned out almost all other weak or over-leveraged holders - check.
However that initial drop was a fakeout and very soon after buyers stepped in. A move that would have got the attention of a few traders with a keen eyes for shakeouts.
Then Thursday came along and we saw some serious buying and soon enough the sp broke back through resistance to recapture its bullish range. This would have been the MM, momentum traders and also potentially some weak holders that just dropped in the 8's deciding to buy them back in the 9's (don't worry, we've all done it)
Then Friday came along and the ultimate deception (MM's bread and butter). We'd just seen EUR recapture its bullish range and had another great night on the Lit ETF yet EUR actually closed the day back below support - not an ideal close.
That brings us to Mondays action and wow, what a strong signal for the bulls.
Not only did it recapture the bull range but it smashed through some significant levels
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In the chart above we can see where all the money is since EUR started its run from around 7c in late Aug.
The key level here is the POC (Point of Control) - this is the most heavily traded price point and therefore can act as heavy support or resistance.
POC for this time period sits at 9.9c. This a level its had trouble with previously although yesterday it absolutely smashed through it - thats very good for EUR holders.
What is also very noticeable is the lack of volume above 10.5c. Above this level its evident by the LVN (Low Volume Nodes) and no volume above 12c. What this means for EUR holders is that with the right move this area will be very easy and quick to get through as it's a very low traffic area.
Seeing as 12c has posed resistance before I'll be watching for a move to break this level and if thats achieved I think it won't take long to get to the highs seen in March 2019 at 18c.
Obviously the momentum from EURs price movements could quite easily be enough to break through this resistance although the overnight moves on the Global X Lithium ETF will certainly help.
I mentioned there were two significant event in the last 24hrs.
EUR shakeout was the first.
The second was the Lit ETF breaking through to hit new ATH.
At the time I'm writing this The Lit ETF is up over 3% and at new ATH. This is very very significant for the sector and I'd imagine will see an ocean of green in the lithium space today.
Hopefully this helps us initially break through 12c then if we could see a continued push in lithium sector over coming days/weeks I don't think a test on the December 2017 highs is out of the question at 32.5c...
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Certainly an exciting time to be an EUR holder with lithium running hot at the same time as a resource update due.
EUROA may start to see some big jumps in price now that they are trading in the money and the sp is getting above that all important 10c where every pip is worth 0.5c instead of just the 0.1c the sp has been trading through. Anyone watching AGYO yesterday would have seen how this can play out.
Big week ahead I think...
AIMHO
DYOR
GLTAH
(20min delay)