OTIV OTI On Track Innovation – Bullish ABC Pattern Chart Update

by Olivier on January 10, 2014

By now you should know I am always on the lookout for bullish ABC patterns. Nothing really complex. Very reliable. Simple to spot. Simple to find if you do simple above average volume scans. And it is rather easy to define your risk the closer to the apex of the triangle you enter. Put another way: typically volatility tends to compress before a thrusting move to the upside starts.

I pointed out OTIV’s bullish chart and volume behaviour in a post a while ago:

The stock has behaved rather well all the time. As I pointed out in the chart below, except for the slightly disappointing closing price leaving us with a seemingly bearish looking candle with a tail, I believe the overall bullish set-up clearly trumps this very short term bearish implication. While I could certainly be dead wrong with my technical analysis assumptions, there are two things to watch for to vastly increase odds for a price move to around 5$.

  1. Huge volume kicking in. A volume burst of roughly 1.5 million shares a day would qualify.
  2. Price moving towards the 3.73 – 3.75 area. I highly suspect a ton of stop buy orders to kick in there.

Click chart to enlarge:

I’ve talked about ‘Price Risk versus Information Risk’ a few days back. OTIV – OTI On Track Innovations’ chart is a classic example of what will happen if the bullish scenario unfolds:

  • On the one hand there are those market participants who have analyzed the recent price and volume behaviour and have come to the conclusion that what they SEE is enough for them to put money at work in expectation of good things to happen in the very near future. The price they pay is ‘Information Risk’. This is meant by ’embracing ambiguity’.
  • On the other hand you have market participants who need more price confirmation. They also have to satisfy their need to know ‘why’ something has happened. The price they pay is ‘Price Risk’.

As a general rule, the more you need to know, the less you are going to profit. Simple as that. Act accordingly and always focus on managing risk.

Hat tip to Charles Kirk for tonight’s excellent quote:

Focus on what is, not what may be. It’s much easier to make money if we assume something that is already happening will continue to occur, rather than fearing or hoping something that is not happening will begin to happen. – Chris Ciovacco

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