This post is written following close of trading on Friday, 22 October.
There is no need for me to revert to my normal practice of reading chicken entrails tonight to make sense of the last two days (a fact for which the remaining chickens are ever so grateful), because it's as obvious as the nose on my face, i.e. very obvious indeed.
The attached chart contains two clear messages: - The Andrews pitchfork method of charting can be, in some cases like OVR, astoundingly accurate in identifying potential limits of price movement and turning points, and - Fibonacci retracements are alive and well and operating quite nicely in the OVR neck of the woods.
I have highlighted on the chart the ongoing frequency with which price continues to perform exact touches (to the nearest half cent of course) on the various warning lines of the pitchfork and also on the lighter coloured lines marking the 0.618 Fibonacci divisions between them. Given that I first drew this basic pitchfork on 2 July and merely extended it outwards by the addition of parallel warning lines at set intervals, the fact that it is still acting as a valid descriptor of price movement is, to me, quite remarkable. It gives me confidence to base ongoing assessments of future price action on these lines (price levels).
I'm also aware that most fund managers and other large market movers base their investment decisions not only on fundamentals, but also on the technical advice of a room full of TA specialists. Computer based trading is also performed according to rules (derived largely from TA) so if you can determine what methods they use most often, you can anticipate their buying and selling patterns and pre-empt them. That's my theory anyway and it works often enough for me to stick with it.
PRICE ACTION - LAST TWO DAYS (see attached clickable chart)
Yesterday, 21 Oct, saw price reach an early high of 31.5 cents by 10:30 and peak on the 4th warning line of the pitchfork (to the nearest half cent) before pulling back to test the 0.618 line below the previous day's high and subsequently the 3rd warning line below that as support levels. Both failed. Price finally found support on the next line down - also a 0.618 line and the 25.5 cent level - at which it closed.
Today, 22 Oct, price opened at the same 25.5 cent level, attempted and failed to penetrate above the higher warning line at 27 cents (reaching 27 cents only) before falling quickly to set its low for the day at 24 cents. This low also happened to mark an exact 0.382 Fibonacci retracement of its rise from 12.5 to 31.5 cents. Having satisfied all the retracement pundits, price then approached the same 25.5 cent level from below (now a level of potential resistance) and settled there, having found support but being unable to rise above it. Note that in doing so, price closed once again on that same 0.618 line of the pitchfork that marked yesterday's support level.
SIGNIFICANCE?
It appears to me that 25.5 cents has now been established as a level of support on two consecutive days (with price moving from opposite directions), particularly after touching a recognized retracement level at 24 cents. For those who might have bought into OVR recently in the 28 to 31.5 cent range and have been disturbed by today's low of 24 cents, the outcomes mentioned above mark a healthy, and dare I say necessary, pause to regroup after the strong rise from 12.5 cents, and to build a new support level for the next leg up.
I would be disappointed to see price close below this 25.5 support level again. If by chance it does go below there, I will be loading up big time to add to my existing holdings, as I would expect it to be a very short-term spike down.
NEXT? (see attached clickable chart, again)
In accordance with pitchfork theory, I would expect price to next retest the 3rd warning line (the 27 cent level) from below as a potential resistance level and, if it breaches that level, to continue up to retest the resistance previously encountered at the 31.5 cent level.
On the other hand, if the attempt to penetrate the 27 cent level fails, price should revert to the 25.5 level to gather momentum for its next attempt. Based on the 'Knock three times' theory, that next attempt will be successful. Then watch out 31.5 cents, and beyond.
Of course it's all just my opinion only, but at least the chickens are sleeping well tonight!
Regards, Bones
OVR Price at posting:
25.5¢ Sentiment: Hold Disclosure: Held
(20min delay)