25th Mar 2019
Dear Fellow Traders,
I am referring to Frencken Group Limited. It’s a stock that is hardly trade-able in recent past due to its lack of liquidity. This gives the chart a spotty characteristics which does not lend itself well to analysis.
On 21 Feb 2019, ATR Ratio closed above 1.0 (see chart below), effectively ending the ATR Squeeze, and with that the Range Contraction Period. Stock gapped up on 22 Feb which was followed by 3-bar correction (stock pulled back for 5 days) which provided us with a setup to long at 1 tick above high of 0.495.
This was repeated almost alike with another 3-bar correction on low volume. Stock broke out again on 12 Mar. Stock has since morphed into another setup.
With the gap up and the subsequent follow-through, the dynamic of the stock has changed significantly. A few things collaborated to make it an interesting stock to watch before the recent run:
- Stock gap to 90-day high. This helps to eliminate most of the immediate overhead resistance.
- Breaking away from the Range Contraction Period shows commitment of the buyers. Such breakaway also provides the highest profit potential.
- The low-volume pullback that followed after the breakout is a sign of strength.
- Increased liquidity makes it safer to trade.
What is left NOW is to manage the stock closely using the 13 & 26sma and ATR Ratio.