In this article, we will analyze what VS Industry is doing through technical analysis. We will also look at what its trend is. Join me on this journey of technical analysis of VS Industry.
This is another stock that I have not look for more than a year. So sorry for Malaysian readers. I look at the US market rather than the Malaysian market. But now and then I will look at Malaysian stocks and comment on them. I get lots of insight even by looking at Malaysian stock charts because as I found out, the technical principles work the same as US stocks.
What I have noticed is that many Malaysian stocks are in a downtrend and only recently they have managed to bounce back up a bit.
VS industry is one of those stocks that has suffered a big gap down. I don't know what's the reason but I guess must be earnings related. And ever since the second gap down the stock has rallied up quite a lot. If you had catched it right at the bottom you would be making lots.
Oversold stocks can often give you the opportunity to make 50%, 100% or even 200% if you catch it right at the bottom. But how often can someone survive catching a falling knife?
It's those professional traders who are able to do it.
And to do so, one needs to look at the smaller time frames.
Playing oversold stocks can be risky but you can often find entries in lower time frames such as the 60 min chart above. The latest mega move was a combination of:
It's really funny, but I have often found that when 3-5 technical criterias all happen at the same time, the stock can explode higher. After that, it is a matter of finding places to add more.
Currently I do not see any setup that I like except that if it continues to consolidate right at the previous high and then breakout, then we could see it rise a bit more.
What about this stock as an investing candidate?
Well, if the stock is below the weekly 20 MA and 50 MA, its better to forget about it as an investing candidate. Better to treat it as a hit and run or trading candidate.
The stock was a first class investing candidate last year when it was trading above the weekly 20 MA and 50 MA. But right now, one has to think twice about investing in it. Better to trade it.
VS Industry had a nice run up rebound these 2 days. If you take a look at the weekly chart of VS below later, you will realize why it bounced up.
But first let's look at the staple daily chart.
After breaking below its 50 MA, the stock had a sell off. It even slashed through its rising 200 day moving average which usually is not a good sign for most stocks.
However, it later formed a variation of a bullish engulfing pattern which help to send it higher today. There is quite some resistance overhead. So one has to be careful and realistic as these resistance areas will take some time to be overcome. I have highlighted them using the resistance 1 and 2 areas above.
For a more sustainable run up, we really need to see it trade back above the downtrend line.
When we zoom out into the weekly chart, we can see why it bounced up. The stock was hitting the rising weekly 50 MA and this can sometimes help a stock to bounce back up.
What is encouraging is the stock has formed a weekly bottoming tail.
If the stock can break above the highs of the bottoming tail, it might send the stock higher.
The chart above is the 60 min chart of the stock.
As you can see, the stock ran up to a resistance area which I have colored in red. Which is why it sold off towards the end of the day.
The stock has some support area below. I have highlighted the immediate support area below in blue.
Since there is some resistance, it will be good to have some kind of short term consolidation before breaking higher.
Previously, VS Industry's share price tried to breakout higher.
It experienced a breakout failure and collapsed to below a previous low only to shoot back up higher by the end of the day. This is what we call a whipsaw.
As Ed Seykota the legendary market wizard says "To avoid whipsaw losses, stop trading".
That is sound advice from a man who has seen it all in the markets.
The chart above is the daily chart of VS Industry.
As you can see, the stock tried to breakout higher but it failed. One good thing that came out of it is the bottoming tail that formed on heavy volume. A bullish reversal candlestick that forms on heavy volume usually hints of bullishness.
This is where the weak holders throw in the towel and investors come in to scoop the stock up.
The bottoming tail tells us one thing. The stock refuses to go any lower. This will be a very useful reference point for us.
I believe that as long as the stock stays above the lows of the bottoming tail (around 2.70), it will move higher from there. Doesn't matter how long it trade sideways. Just as long as it stays above the bottoming tail, the stock will eventually move higher.
The chart above is the weekly chart of VS Industry.
We can see that it is in a very strong weekly uptrend. Therefore, we can treat the weekly consolidation happening now as a rest before it goes higher. A trend in motion tends to stay in motion, therefore, we should have a bullish bias.
Notice how the stock also forms a weekly bottoming tail. This is something good for the stock as well.
While we do not know when or whether VS Industry will breakout, we can continue to put an alarm to alert us to the breakout. Normally traders will buy the breakout and put a stop below the low of the consolidation.
VS Industry is one of those stocks that is being watched by everyone for a breakout.
With a flat top with same highs and the stock recently making a higher low and shooting up to the old highs, it is no wonder that most traders, investors and analyst are expecting a breakout.
The chart above is the daily chart of VS Industry.
The stock has had a very nice run up and the current sideways consolidation can be considered a period of rest before the stock breaks out.
I'm not very sure if you can call this pattern an ascending triangle. But one thing you will notice is that the stock has shown some willingness to make a higher low. Stocks that are about to breakout higher often exhibit this kind of pattern. Making higher lows tells us that the stock is refusing to go lower.
With such a nice horizontal top, we can expect the stock to shoot higher if it can break decisively above the 3.17 to 3.18 area.
If you look at the weekly chart of VS Industry above, there is evidence to expect a breakout.
The stock is almost touching the rising weekly 20 MA. If you look at the chart history of this stock, it has shown us that it likes to break out when it touches the rising weekly 20 MA. So, perhaps history might repeat itself this time.
Since this is a breakout play, I would advice you to put an alarm on the stock.
Charts with the Freestockcharts.com label are courtesy of Freestockcharts.com
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