CTSH Possible Exhaustion Gap, Stop Exceeded

CTSH daily May 4th

CTSH daily May 4th

I was away from my desk for most of the day but just responded to this question on the CTSH short trade. My reply & thoughts are below:

Q: Cognizant Technology Solutions gapped up today (must have good news?) I am still short What are your thoughts - best to sell?

A: Although we need to see today’s gap backfilled to help confirm it, today's price action in CTSH has the making of an exhaustion gap. If that proves to be the case, which will likely be confirmed if prices go on to backfill today's gap, then we are likely looking at a top in CTSH with a new downtrend to follow.

Here's a link from Investopedia describing the various types of gaps: Analyzing Chart Patterns: Gaps along with an updated chart of CTSH attached. I've circled the above average volume bar which helps to confirm that today's earnings induced gap was likely an exhaustion gap.

Reviewing the charts, I think a stop over 63.90 – 64.00 would be prudent at this point for those still short (which includes me) although CTSH will now be moved to the Completed Trades category as the original suggested stop was exceeded today. FWIW, if CTSH does start to move lower from here & goes on to backfill today's gap, there's a very good chance that it will go to at least that second uptrend line (54 area, with a suggest BTC at 54.60).

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As CTSH is now officially stopped out, additional updates on this trade will not be posted. However, I remain short personally & will be glad to update my thoughts should the trade fail to move back above the 94 level. As such, feel free to contact me if you have any questions or comments on CTSH going forward.


2017-03-08T21:20:30+00:00 May 4, 2015 10:23pm|Categories: Completed Trades - Short|Tags: |Comments Off on CTSH Possible Exhaustion Gap, Stop Exceeded