Here are some mega thoughts on meta stocks. Check out Unity ($U) and Roblox ($RBLX) (May 16, 2022)
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Dan Fitzpatrick at stockmarketmentor.com. I want to look at a couple of real duds here today and that is Roblox ( NYSE: RBLX ) and Unity Software ( NYSE: U ); I think Roblox ( NYSE: RBLX ) could really be described more as cinder blocks.
These are a couple of these metaverse stocks that are supposed to do really well from Mark Zuckerberg’s new Meta platform ( NASDAQ: FB ) thing. It is not my deal personally, I think you look like you are a welder wearing those stupid goggles and I don’t need an alternative universe or life, I like the way mine is just the way it is.
With that editorializing out of the way, it is going to take a little while for this thing to get going. And nobody knows, though many people think they do, nobody knows exactly how popular this thing is going to be. Of course, the future looks so bright you’ve got to wear welding goggles.
What we are seeing right now is, that this stuff isn’t working at all ( NYSE: U ). You’ve got two of these companies, they are video game companies that are supposed to be making major roles, they’re going to make a lot of money in the metaverse. Well, there is not much to the metaverse right now but there is a lot to these charts. Only the most fervent believers would argue that this stock is in anything other than a downtrend. This is kind of what the epitome of a downtrend looks like.
Now, you can say with respect to this, oh yeah but this is a good time to buy, it’s going to bounce. Well, first of all, not necessarily. It might bounce, but it might not. I could point to 18 different places on this chart where a similar bounce would have happened, only it didn’t. What we have got here is a 2-day rally starting on Thursday and then into Friday.
That’s the way this stock traded along with the QQQs ( NASDAQ: QQQ ), along with ARK ( NYSEARCA: ARKK ), which if I recall, has a pretty big piece of the action in RBLX ( NYSE: RBLX ), they buy all the stuff in the lower right-hand corner of the chart, meaning the penalty box in my view.
But here with Unity ( NYSE: U ), this was the deal, this was 2-days, a big move on Thursday, a big move on Friday. And so from bottom to top this thing went up over 30 percent, almost 35 percent if you are buying at the very low on Wednesday, and so that was a huge move. It only makes sense that this is retracing some of its move.
Here’s what I would do, this is not my trade. If I had seen it, and I didn’t, I would have bought the stock on Thursday morning simply as a deeply oversold bounce. The stock runs up above Wednesday’s open, which was 32.33, that would have really been my technical buy point, right when it broke up above the prior day’s low, and then that would have been some real good money. This is standard 59-Minute Trader stuff that I teach. This would have been a good trade, it wouldn’t be a bottom/top thing but it would be the good meaty in between, so that move is over.
What I suggest now is, (1) you recognize this is in a downtrend, it isn’t going higher, not for a while. If it does ultimately, fantastic. Are you still going to be around then? I couldn’t tell you, that is your decision to make but there is also a calendar element. How long are you going to be in this before the stock goes up? Now, if you are on the Cathie Wood plan, oh, it’s a 5-year plan.
Now, let’s look at Roblox ( NYSE: RBLX ) here. It’s the same kind of thing, this is actually pretty impressive. Because on Wednesday morning the stock actually gapped down, traded really high, fine, during the day. But then over the next couple of days, it printed higher lows and higher highs. AND even today, the stock has printed even yet another higher high, and I am doing this about 6-minutes before the close, I think we are pretty safe here to say it has printed another higher low.
So actually, Unity Software ( NYSE: U ), it’s not the same thing. Today’s intraday high was a little lower than Friday’s. Today’s low is probably going to close below Friday’s intraday low. But Roblox ( NYSE: RBLX ) here is a totally different thing. This is still really technically in a rebound phase if we are looking at this. I like to look at higher intraday lows and intraday highs.
I look at the intraday extremes to really get a sense of who is really in charge, bulls or bears? I would say that today was a turning point. At some point, this all ended. And I have got to say, right here, this was the top, 10:30 baby. This is why I call this my trading style, my intraday trading style, the 59-Minute Trader style. Meaning you shouldn’t be around more than an hour and typically even less than that.
This is where the stock peaked. You will see big selling volume here. The biggest volume of the day was right here on the way up, 10:15. The biggest selling volume was right here on the way down. This is a great example of my tenet, which is, that the most money is made right before the peak. And the most money is lost right after the peak, that is what we see here.
So technically if we are just looking at intraday highs and lows then the bulls are still in charge. But on an intraday basis, the bulls, they shot their wad right here. That’s the end of that and so now you have to look at closing location values here. Here, the stock closed, probably in the top quarter of the range. Here, the stock basically closed right at the high. And today, the stock is going to close just about right at the low, perhaps at the low, we are still trending lower here.
So this is a stock where you are definitely not going to see this video until tomorrow, you should have sold today, that’s all I will say. This is how I look at charts, this analysis that I gave you, to me is a really helpful way to look at charts, especially in these choppy, choppy volatile markets. When I look at things within this context I get a real sense of when the strength has shifted.
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