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Triangle Pattern In DAVE Ready To Pop

DAVE (Famous Dave's Of America) looks ripe to pop out of this symmetrical triangle pattern one way or the other any day now. I favor an upside breakout which is likely to spark a short covering rally. As this stock is still in a vicious bear market that has wiped out 85% of this company's share price since the Feb 2015 highs, this should be considered a very aggressive, counter-trend trade with the appropriate position size made to one's position, assuming such as aggressive trade on a highly shorted company with fundamental issues even meshes with their trading style. Due to the aggressive nature of this trade, DAVE will not be added as an official trade idea but rather as an unofficial long trade setup for those interested.

DAVE daily April 21st

DAVE daily April 21st

DAVE looks to offer an objective, yet aggressive long entry on a break above this downtrend line or the 6.06 level (whichever comes first). These two price targets above are near-term targets for a quick trade likely to last just a few days at most. See daily chart for longer-term swing targets. note: DAVE is scheduled to report earnings on May 4th which is likely to cause a large move in the stock one way or the other.

DAVE 60-minute April 21st

DAVE 60-minute April 21st

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Apr 21, 2016 12:38pm|Categories: Uncategorized|Tags: |7 Comments

7 Comments

  1. GetItRiight April 21, 2016 1:06 pm at 1:06 pm

    Isn’t the barely there volume a problem? There are 10 minutes or more between trades.

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    • rsotc April 21, 2016 1:49 pm at 1:49 pm

      Some traders avoid thinly traded stocks but they’ve never bothered me as long as the chart pattern looks nice & the R/R on the trade is attractive (amusing that the spreads aren’t excessive & the volume isn’t too low). I use limit orders vs. market orders when buying & selling thin stocks & I also use them primary for swing trading vs daytrading as the longer you hold and the higher your percentage profit gains are, the lower the impact on any spread differentials that are above 1 or 2 cents. DAVE has been trading with about 4-5 cent spread today & you can usually place your buy order a penny or two below the ask price & get filled. At the current price of about 6.00, if you lose 4 cent due to the spreads, you’re looking at a lost over just over 1/2 of 1%. That’s why I typically won’t daytrade thin stocks unless shooting for a pretty large price target. If DAVE hit that 6.34 target, a 5.25% gain, the money “lost” on the spread differential would be minimal. Plus, should DAVE break above that pattern, there’s a good chance that the volume will increase, thereby reducing the spreads.

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  2. snp April 21, 2016 2:35 pm at 2:35 pm

    one single trader can kill the price out of no where with thin volume. conversely, one trader can drive it up beyond technical limits. double edge sword that volume…

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    • rsotc April 21, 2016 2:53 pm at 2:53 pm

      Good point. One consideration that I factored into this trade is that with the high short interest in DAVE couple with that symmetrical triangle pattern on the daily chart, the recent bullish divergences in place at the lows (also shown on the daily chart above) and the fact that DAVE is still just above key long-term support on the weekly chart, I’m figuring that we may see a fair amount of buying pressure over the next few weeks as shorts start to unwind or reduce their position to avoid getting blown out on a positive earnings report or forward guidance on May 4th.. at least that’s what I would do if sitting on a profitable short position.

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  3. snp April 21, 2016 11:39 pm at 11:39 pm

    a 16% rally in markets is a rising tide that lifts all boats. except this one. what happens when the tide goes out? thinking the sideways action in daves is only due to the buying frenzy of the last two months. thinking the food is not the only thing getting smoked and in a pit…

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    • rsotc April 22, 2016 9:31 am at 9:31 am

      snp- That may very well prove to be the case. A trade setup is only a setup until & unless triggered. I haven’t counted but I’d say there must have been dozens of trades booked for double-digit gains so far this year from stocks with very questionable/poor fundamentals such as energy stocks, which just a few months ago, all the buzz & chatter was how toxic most of those stocks were & how many were likely to file for bankruptcy protection. As an active trader, I’ll trade the charts over the fundamentals all day long. As Baron Rothschild said, “”The time to buy is when there’s blood in the streets.” and DAVE certainly looks bloody right now but again; no breakout, no trade.
      I’d also add that I STRONGLY encourage anyone not comfortable with a trade for any reason to pass on it & wait for their type of setup to come along. I don’t think that my wording about this being a very aggressive, counter-trend trade in the post could have been any more clear so I’d imagine that quite a few will pass on this one as they should.

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  4. snp April 22, 2016 11:39 pm at 11:39 pm

    and of course im only spouting off opinion because its an open forum….I agree about short squeezes and most hated stocks going crazy. jcp, shld.

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