The long thread below was written in response to a query about an ongoing trade in ABR. Yesterday  ABR broke up to firm up a target of $1.93. Looking at the chart again today I’m wondering if it isn’t a Wyckoff Pattern (the rectangle). I’m no expert on these but where I have come across them, they almost always work. They are quite a complex pattern and use Point and Figure charts to determine a target when they break out. That theory suggests a target of $1.80 which is close (but not as close as I would like) to my resistance break target of $1.90.

Oh – a couple of corrections to my earlier post. I mention a possible pennant pattern but that was an error. A pennant pattern needs to have a valid technical 12 week uptrend prior to said pennant – and it doesn’t! Also my Elliott Wave count was incorrect I believe - time will tell.

ABR 14Sept21

15 August 2021

ABR isn’t a stock I’ve traded previously – probably because the way its price moves there aren’t too many opportunities for someone like me who looks for specific patterns to buy in on.

I’m guessing you bought in about March/April 2020. Technically there was no buy signal at that time but it was a good call on the basis price was climbing nicely before the March Covid fall and once that turned around getting on a trade was a reasonable punt. If you’ve read my material you won’t find anything there that suggests how to get into a trade on a stock like this back in March 2020. Around $0.50 in late May there was a technical buy signal – so at $0.19 you had a good head start.

Once in a trade the hard part is when to get out (I’m probably not telling you anything you don’t already know). If I use the same exit strategy as I’ve been using for my hypothetical portfolio I comment on each week, then you would have been out at about $1.45 after the big fall in May. That type of simple trading plan works well for medium/large cap shares because they generally don’t have meteoric rises or spectacular falls (especially those driven by management issues – as it seems ABR might have suffered).

Anyway, we’ve all been there when a stock falls out of bed for whatever reason and in ABR’s case you’ve lost 50% of your profit (at least it wasn’t 50% of your capital I guess) – so what to do?

The blue dashed line is a support line that price has held above for some time (the Covid fall was a bit of an anomaly that you will see in many stocks). There was a good probability that price would eventually fall back to that support – which it did at the end of June. That June low is also a level of support around $1.03 (the red dashed horizontal lines are levels of natural support I’ve calculated. Given price had been moving up quite well for a long time prior to the crash landing, at the end of May I’d be thinking price very well may recover – they usually do after a big fall like this. When price fell lower again in mid-June my resolve to hold would have been sorely tested because I’ve now got both a trend break and a new weekly low telling me to cut and run (and I probably would have!).

Would I have bought back in yet? No way, but if you’ve held onto the beast as it has galloped into the abyss –what do you do.?

On a positive note price has remained in the uptrend that was in force prior to the May fall because (like the Covid fall) that fall didn’t see the 12 weeks of lower prices that are necessary for a downtrend to be confirmed. If price falls back to close below $1.06 then the downtrend is in and then the trade is looking very shaky.

Price can often drift sideways after this type of fall and it may just continue to do that until it meets that underlying rising blue support. There is a descending dashed light black line over recent price movements which makes (with the blue line as its base) a triangle (a pennant pattern maybe). I’d be hoping price will break up out of that pennant with some volume in which case there are some charting theories that suggest price could jump to around $1.90 (although it does depend how long it takes to break out. There is overhead resistance around $1.55 and if price closes above that level then the resultant resistance break suggests price could go to $1.80. As $1.80 is also a level of support and resistance then that would be my bet as a point price would turn down again (but probably only for a time before moving up again – ie get back into the saw-tooth price action it showed before).

This is a long-winded way of saying ABR might be getting back on track and unless it closes below that blue dashed line I’d stick with it (but it is your money not mine). It’s not entirely out of the woods but a move above $1.55 would give me reason to expect more rises ahead.

The unknown is that charting can’t predict catastrophic collapses due to company specific issues that couldn’t be foreseen – meaning it could happen again. The last 5 weekly candles show a lot of investor indecision.

This stock regularly has retracements of 15% - 20% over a  couple of weeks – so it isn’t for the fainthearted but if you’ve made good money out of it you can afford to sit and watch a little longer – but lookout if price closes below $1.06.



Robert Norman

Phone: 0428 346 951

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