Once in a while there will be a stock or two that shoots up 1000% in a short period of time. That is exactly what this little known stock call ALT did. Learn the technicals and how it happened.
The first thing you want to do to learn how a stock moved from A to B is to study the chart and try to figure out the reason and the patterns. Maybe you would not be able to figure it our if you are a newbie. But with time and practice you will be able to spot the reasons.
The chart above is the daily chart of ALT or Altimmune Inc. It is a Bio stock and thus it has a potential to move very fast in a short period of time. These kind of moves happens quite a lot in Bio stocks. Especially if they have some kind of medicine that can alleviate or cure a certain sickness, then you can often see them rise like this in a short period of time.
The first thing that I want you to take note is the presence of volume spikes in the chart above. The lower section of the chart is called the volume. The upper section is of course the price of the stock in candlestick format.
First of all notice the huge gap up on heavy volume on the left side of the chart. Heavy volume plus gap up in price often tells us that the stock is in high demand. The smart money is going into it and thus they can often make the stock move up huge in a single day.
Then a period of sideways movement happened for about 2 months. This can often be frustrating to many people but it is these period of sideways movement that you should start to pay attention to the stock.
As the stock traded sideways, it eventually form a triangle type of pattern. The triangle pattern can be a bullish continuation pattern and as you can see, ALT stock broke out of the triangle pattern.
As it broke higher, you can see the increase in volume coming in. This is an encouraging as this tells us that buyers are buying the breakout and the breakout higher is genuine. Some smart money who missed the first round are also getting in to ride the trend higher.
It is important to know what trend your stock is in. ALT definitely transitioned into a stock that is going to be in an uptrend. After the big gap up, you can see that the stock gone up above the 20 MA, 50 MA and 200 MA.
Simple trend following tools like the moving averages can help us to determine the trend of the stock. If the stock is above the 20 MA, 50 MA and 200 MA. That means it is a healthy stock.
What we want to see is for the 20 MA to be above the 50 MA and both of them to be above the 200 MA. The best is to see all three of time starting to curve up.
If you look at the chart carefully you will see that the moving averages in ALT's chart start to rise. Now we are in a nice uptrend.
The rapid rise after the breakout eventually met with some selling. Some stocks just have to correct a bit before they shoot up more. During this correction, the stock stayed above the 20 MA and 50 MA most of the time. Thus it was still good for the stock.
The stock eventually consolidated at a previous high. This is a continuation pattern where the stock rests a bit at the previous high before taking off. From there, the stock shot up to around $33.
Eventually, the stock drops below the 20 MA. This is a first warning sign that the bullish momentum is slowing down. After that, the stock drops below the 50 MA as well. The nice rise up is over for the time being.
Looking at the weekly chart above of ALT we can still spot huge volume spikes as the stock shoot up. Remember that volume spikes in daily chart and weekly chart are good. They often tell us that people are interested in the stock and that real money is being committed to the stock.
The trend of the stock in the weekly chart also moved from downtrend to uptrend. ALT moved above its weekly 20 MA and 50 MA and eventually a bullish cross where the 20 MA cross back above the 50 MA happened.
The stock also broke out of a consolidation in the weekly chart. We can often take the measured move of a stock to get a target for the stock. As you can see, the stock more than met its measured move target. If you do not know what a measured move is, I highly recommend that you take a read about it below.
Hope you enjoy today's sharing. I hope this will help you to find stocks like these in the future. Shalom.
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