It was in a trading range, building cause, between $6.55 and $7.40 for FIVE WEEKS beginning January 2nd. In the right hand side of that range they took it under $6.55 for four days, which was too long to be a spring (a test of supply), then they popped it back up into the range to shake out some shorts, and the following day on Fryday used the CEO news to take it down to a low of $5.98, printing a sign of weakness (SOW). The move Fryday was an SOW because it had a large price move compared to moves within the range, closed below mid-range, and it had big volume.
There is now a high-volume low on the daily chart and the weekly chart. It will test that $5.98 low. If it can't close above that low, it will go lower. If it closes above the low but has heavier volume, it will go lower.
If it can close above the $5.98 low with lighter volume then it will go back up to test the area between the top of Fryday, $6.45 and the low of Jan 2nd, $6.55. But it is very unlikely it will break thru all of that supply above $6.55 on a first try. If It is to go up, it will need to build a lot of cause first. So, it will go back down to test $5.98 again, so on and so forth, until it has built enough cause.
But it is more probable to continue down, because, there is supply in the background. In other words there are sellers in the background (looking up and left on the chart), and those sellers include every pumper on this board, EVERY ONE. The most recent supply (of stock for sale) was built up over FIVE WEEKS of cause when the smart money was selling to dumb money.
We know now that the smart money was distributing to the dumb money because they did not support price on the news. You need to ask yourself: On Thursday night, did you know for sure, beyond a shadow of a doubt, that it would go down on Fryday? Or did you think there was a possibility it could go up because a new CEO is a good thing? The point is, the news doesn't matter. Because like you, all the dumb money was just waiting to see what would happen. What matters is how the smart money is positioned. And we know now that they were short and/or looking to buy lower because they stopped supporting the low of the range.
So it can't get above the $6.55 supply line without first building cause or having some super tremendous positive change in fundamentals ( if you think that is possible then ask yourself if it is worth the risk? NOT).
But it can go down easily. In fact it can go down on lower volume because supply has already proved itself; supply is in the background. The prudent thing, my intent, is to trade the range, to sell $6.55 and buy low volume retests of 5.98 or whatever the low turns out to be, maybe $5. If it does stay range bound I can accumulate really cheap shares this way, even totally free shares (buy the low and sell all except profits at resistance, rinse, repeat). Then when an SOS occurs I'm positioned for it. If an SOW occurs I sell, but I'm still in the money. If you're already long, you can still trade the upcoming range to improve your position.
Thanks for the thoughtful analysis. Sure, it could go to 2 dollars a share, maybe even one, fundamentals aren't informing the market. that said, fundamentals do drive the private markets (in which i invest and know well) and I am just surprised there's not a take private going down or at the very least a mm i banker trying to pitch their wares. Have a great weekend.