Here’s how you apply the Power Cycle analysis to Biotelemetry (BEATS) (October 16, 2017)
BioTelementry ( NASDAQ:BEAT ). This is why I want to look at this stock: It is kind of applying some of the ‘Technical Analysis for Non-Technicians’ concepts. One of them is called a power cycle. Basically, where is the real power in a chart? Is it in potential buyers or potential sellers. Because if you have a ton of potential sellers the stock is ultimately going to fall. Because those potential sellers are not potential buyers, they are ultimately pressure on the stock. If you have a lot of potential buyers then that stock is ultimately going to start rallying or at least stop going down. Because those potential buyers can only do one thing: they can trade their cash for stock and that buying pushes the stock up.
So here, let’s look at this thing. This stock had been essentially forming this cup and handle starting in April. It is not perfect but you can see the dip here and then a handle or maybe we can even look at this as a handle. It doesn’t really matter because the bottom line is the stock traded higher and then came back down. So any kind of breakout here was not really a breakout. So what does this tell you? It tells you that there were a lot of pot sellers here; which by the way, is what pushed the stock lower right here, so the stock just ended up right here, this was the high. And then, yippee, several months pass, folks think that the stock is going to move higher. Not so fast Horshack, it didn’t work that way, the stock ultimately moves out.
So what are we seeing here? We are seeing all of these potential sellers, they are always lurking up here, they start selling the stock and it keeps a lid on this. But, the stock continues to run higher here so this is telling us that the potential buyers are actually becoming less and less patient. They will reach higher and they will start moving the stock higher in their buying. So what that means is, the balance of power is with buyers. Because there is more money that wants to come into this stock, that is pushing the stock higher.
And then of course at the same time folks that own the stock are going to say, “Well, I was looking at selling it at 35.00, maybe I will sell it at 45.00.” So this is what is happening here. You want to be long the stock, right? Well wrong, because ultimately this happens: The stock totally breaks down. And when it breaks down, when it breaks this channel here (we will just look at support), when it breaks this on volume suddenly all of those potential buyers, they have already bought. And of course, once you buy you are only a potential seller, you are part of the problem, not the solution.
Then the stock trades down here. It rebounds right off the 200-day moving average. Guys, this is a bull trap. You think, “Oh, this is my opportunity to buy.” Golly gee, look what happened when the stock was here last time; it went from about $30.00 up to almost up to $40.00. I want to get that feeling again.” So you buy the stock but there is too much supply now. Too many of these guys who bought back here are losing money and so they are selling into this. Others are looking to short the stock. So now, the new resistance level is here.
What I am telling you is, even though you might look at this and say, “Okay, well here is yet another opportunity to buy at the 200-day moving average.” Don’t do this. What had been a stock that was in an uptrend is now a stock that is under distribution. The best days are behind this stock. You don’t want to be long this stock.
Now ultimately if this resets, who knows? Maybe in six months the stock is going to be $100.00 and you are going to say, “Fitz, you didn’t know what you were talking about.” That could be the case, after all, Jamie Dimon, a month ago was a big genius on Bitcoin, now he is just a bit player in a stupid, tragic comedy. The bottom line is, I could be wrong about that stuff (I don’t even know why I mentioned Jamie Dimon). But right now the stock is not likely to do that. Right now the stock is likely to just be grinding around here.
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