Here are the Highs and Lows of Upstart ($UPST) – May 21, 2021
UPST
I am going to follow up on a video that I have done recently. I put my Stock Market Mentor members into Upstart ( NASDAQ: UPST ); I wish it was down here when it started up after this test of the 100-day moving average. But I put them in on this breakout above this; that was a gap up and then a sell-off, right? The idea is, as long as the stock is trading below that then you have to assume that there are going to be sellers up there. There were big sellers before, right up at this level, right up at the top. It was what I call a gap and crap, imagine if it was a hit and spit. It was a gap and crap here and so the idea is, all of these sellers here sold to somebody, and those buyers are not real happy that they bought.
And so when you see the stock come back to this same price you are probably going to see it just continue to have selling because of all of the unhappy buyers here. And so the natural entry point going forward is when the stock clears this red line. And the reason is, the only way it will clear this red line (we are reverse engineering into a breakout buy here), the only reason the stock will clear this red line is if all the supply creating from the dumb stock chasers goes away. If all of the supply from these stock chasers goes away the only way for the stock to really go is higher because it’s buyers in search of higher prices. What we are looking for though, with respect of chewing through all of this supply and looking for higher prices is, we have to look and see, how deep was this box between where the top was and where the stock ultimately fell?
If it is too deep then what this means is, a stock is already going to have to run up a lot just to test this level. And the only way a stock runs higher is with buying pressure, aggressive buyers who say, I want this stock and I will pay more for it so they push the stock up. If you have a big run in a stock that’s the opposite of a volatility squeeze, this is more like an expanded volatility. If you have a big run in the stock before it tests the breakout, that breakout is likely to fail just because all the buying pressure has been used up during this move higher and so it is more likely to get more selling. This is one of the reasons why I like to trade volatility squeezes, right?
And so as kind of a counterpoint to that, if even though the stock has had to run up, this thing ran up 40 percent, from the low here up to this prior high, this thing ran up 40 percent. That is a HUGE run in order to test this supply. So I would look at this and say, “Yes, absolutely, this stock is going to come up here, and then it’s going to fail because it has been a 40 percent run.”
But then you also have to be taking the other side of the trade and say, okay, let’s say that the stock hits this area here and does not fall. In other words, this stinking thing has gone up 40 percent and I think it’s going to fall back. But if it goes up more than that, if it runs through here and keeps going, what that tells me is, there is some serious demand for this stock, some serious demand for it. And not only that but if it does run up here where is the resistance? There is no resistance at all until we get back here in the first part of April, and this is an IPO. So for more than a month, like a month and a half, this stock has been trading sideways. If it breaks out above here everybody that bought here that had been a loser, well suddenly they’re a winner.
This is some of the reasoning, and by the way, when you start thinking about stocks this way, it has taken me 5-minutes to explain this, it will take you 5-seconds to look at a chart and make this determination, but it is based on stuff that you have to know first. That’s the problem with most technicians, they look at a stock chart and they think that somehow, magically the stock moves itself. It doesn’t. Crowd psychology and financial commitment is what moves a stock. If you don’t understand that, then you are just some goofy dude drawing squiggly lines and boxes and making guesses on stuff.
I was looking at this line as a huge tell. And so right now we are back here below the 50, still trending lower, Now it tested this, this one day, this is on the 17th. In my view, it is no surprise that the stock closed here on this day at 115. 00,. what was this high here? The high day back on the 12th was 115.48. So this stock on this day closed $.48 below this last high and it closed dead balls right on 115.00. And so this would give you even more confidence that if we are still in the if stage, if the stock breaks above this level, above 115.00, this puppy is going higher. It didn’t do it on this day but on the following day it sure did. This thing broke up above 115.00, and where does it close at? It closes at 119.49, a decisive move higher than this, it ran up above 120.00 to 124.90.
Now, this is what you have to start understanding, this is a major point that I want you to understand. We see these open boxes, that means the close is higher than the open. We see these open boxes here, a big high magnitude move here. A big high magnitude move but not quite as much. And then this one, the same thing, a nice open box. By the way, pay attention to this stuff, this is advanced stuff here, you have got to be understanding this.
The range, the daily range is actually tightening and the closing location value and that is how high within the daily range, right there and up here, how high within the daily range did this close? Almost right on; here is the daily range, right there, almost right on. Now, here is the daily range. Where did this close? It closed appreciably lower than the top, which is what we had here. And so you can look at this and say, okay, well this is different. And it is, it kind of shows that the buying kind of petered out here, so that’s a red flag.
Well, no it’s not a red flag, it’s information and this is why, because since this low here look at the low and the opening prices on each day. This was the low, this was the high here on this day, on this turnaround day. Higher low, higher low, higher low than the prior days. Higher high, right here as opposed to this high, right? And then here was the high, oops, the next day higher high. And then the following day, higher high and a higher intraday high. A higher intraday high, higher intraday high. So if we are looking at the intraday highs and lows then this is what we are seeing here. We are seeing the intraday lows like this, and we are seeing the intraday highs like this. This is the strongest thing that a stock can do.
But wait, there is more. Pay attention to the open here. The stock ran up above 120.00, it couldn’t really hold it and came back down and closed just a little bit below 120.00. So all of these chart readers who look at this and say, oh, it closed off of the high, that’s a problem. They are going to be selling, right? And so fine, look at the way the stock gaps down, this was the close. It gapped down below this high. Where did it find support? At the 50-day moving average.
You see, there are many, many aspects of a chart that you can look at and say, IF the stock tests this level there is probably going to be support there. If there is not then that is important to know. IF the stock tests this level there is probably going to be resistance there. If there is NOT that tells you something here. So we are in, this is telling us something here. You got it? So this stock gapped down and it held 110.00 and it held the 50-day moving average. So this is actually a really strong stock. And the fact that the stock actually gapped down here and then recovered, that is actually bullish, it’s encouraging. And this is why, because what you WANT within an uptrend, whether it’s an intraday uptrend or an uptrend based on weekly or monthly bars, what you want is the occasional bout of profit taking.
What that does is, it cleanses the stock. It kind of washes out all the traders who are really looking to take profits, the short-term traders. And so when you see the stock start to drift sideways that tells you that there are some short-term traders that are taking profits. And then when the stock starts to move higher, that’s when you really identify, these are just short-term traders taking profits, and so who are they selling to? People that are having a higher cost basis than the folks down here. And so you are taking traders that have profits because they bought here and so they are taking profits. And who are they selling to? People that are buying the stock here, now they have no profits. And so you are cleansing out the, I’m going to sell for a profit people and instead replacing them with, I’m going to HOLD for higher prices.
So you want to see the average cost basis of traders RISE with the stock because then that tells you that there is not a lot of profit taking overhead and the stock can continue to run. So look at this, once again, a higher intraday low, a higher intraday high. And we got a gap higher this way, not a lot, less than 2 percent, but where I come from that’s kind of real money. And then we get another move the following day, which is today. A higher intraday low, a higher intraday high.
Now, my price target was 160.00, I still think it’s going to hit it, probably not today but you never know. By the time you are getting this video we might be at 160.00, yay. But I have just told you the analysis that I have used for this stuff and when you think about it, all I am doing is applying the things that I know. I don’t have this prescient ability to predict the way stocks move. And so if you want you could say, you got lucky. Sure, that’s fine. But you know what? When you are managing your risk and when you are really analyzing what’s going on in a chart, it’s amazing how often you get lucky. I would say to the contrary, this type of trade is based on the reasoning and the logic that I have shown you.
There can be any number of times within this, where what happens after this move here the next move down was like this as opposed to this? Well then, if that’s the case you have got to say, well alright, that trade was blown, time to get out. But that would also be a good trade, it just wouldn’t be a profitable one. And the reason it would be a good trade is, at least you know your reason for getting in. And if you know your reason for getting in then you can know your reason for getting out and so you are going to sell.
So far this is looking like a pretty good trade, and you know what? I take back what I said just a minute ago, we’ve got 25-minutes left in the trading day when I am doing this and this thing is probably going to be pegged. It’s expiration Friday, it’s probably going to be pegged at 160.00, but who knows? The bottom line is, it will or it won’t, you do or you don’t. But you have got to have this type of analysis.
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