For your infotainment thought I’d share an MYX chart I was...

For your infotainment thought I’d share an MYX chart I was looking at last night when I was pondering the question: “Why did the price pause here, and what is the highest probability move next?” Apologies for long post but hope it’s interesting for some…

I’m discovering that every chart tells a story- obviously not the complete story, but a story nonetheless.

In this situation I imagine the professional “smart money” to be like a really big, strong, expert mountain guide. You both want to get to the top of the mountain, and you know this mountain guide has all the best equipment and knows the most direct way to get to the same place you want to.

But you can’t trust this guide because he has a huge appetite and he’s constantly looking sideways at your backpack full of supplies. He wants every last morsel to build a stockpile, and although there may be more direct and easier ways to the top, he will lead you back down and around the mountain to wear you down, or panic you into taking your eyes off your backpack- then grab it and happily wave goodbye as you fall off a cliff.

The trading over the last week or so looks like what the VSA stuff I’ve been reading calls “bullish absorption”- where the smart money sits and manipulates in a range to soak up and accumulate as much supply as possible before the next price mark-up can begin. They want to find any price ranges where there may be a lot of sellers which could act as potential resistance to further increases in price (and to build up more shares at a discount). If there is too much selling (lots of supply) which results in the price being pushed back down, then the stock is not yet ready for the next mark-up and they’ll continue soaking up shares until supply dries up enough to move ahead.

So why pause at this current level? Check the chart - if you look for the next potential price range where there may be a lot of sellers, then the most obvious is the ultra-high volume trading range way back in August last year, where if you look at the hourly charts by far the biggest volume was traded between 0.835 and 0.915. Bingo! That’s about where we are now. I’m assuming that during the last trading range before the recent breakout that supply was tested and re-tested enough to move on.

Also a few ups and downs at this level after a breakout might be enough to encourage late-comers (like me) to take profits or hit a few stops- again shaking out some more shares to fill their bag. Also they want to have a lot of buyers at the ready for the next jump which they (and we) do- in the form of over 100M outstanding shorts. But maybe don’t want to spook them too early so leaving them on the edge of their seats for a bit. So how long will this last? Today was another strong sign that sellers are becoming increasingly scarce, but who knows when it will pop? I guess when it’s good and ready is the answer. I’ve just watched the same thing happening over a couple of months at PLS (Lithium) which finally popped a few days ago.

I wouldn’t be surprised to see some more and perhaps stronger testing of this range but if supply really has dried up, then barring some bad news we could see something like a nice gap-up engineered to kick off the next swing up. Of course this is just one version of the story and I'm early days into learning this stuff, but it looks at the moment like we should hold on very tightly to our backpacks!