GIGM: Cliffhanger Close

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Explanation of a Bearish Wolfe Wave 5 "Bull Trap," from my Thursday morning post:

"...wait for a "TELL," like a Wave 5 upside breakout/fakeout that fails, putting both Bulls and Bears "wrong-footed" on the breakout.

By that, I mean that breakout buying Bulls come in and BUY the stock, stubborn shorts finally capitulate, and BUY to cover their position, and both groups are caught "wrong-footed," buying when they should be selling (bulls), or shorting (bears)."

At Friday's 17.74 close, both Bulls who bought GIGM's 17.71 Bearish Wolfe Wave Breakout on Thursday, and Bears who capitulated there, and bought to cover that breakout, are caught "wrong-footed."

At best, the breakout Bulls have a breakeven if they caught the breakout immediately. All of them who paid prices between 17.75 and Friday's 18.44 high are sitting with a paper loss, after Roth's upgrade and a "bullish" breakout, and the Bears who capitulated at prices above Friday's 17.74 close now are having a bit of regret, and second thoughts.

After seeing Thursday's CLOSE above the pattern, which certainly was bullish, both groups that are caught "wrong-footed" now are seeing that Friday was:

1. A Reversal candle. It made a new high for the move, then closed below the prior day's close.

2. A Reversal candle that CLOSED ju-u-ust barely back inside the Bearish Wolfe Wave pattern, the top of which came in on Friday at 17.7875 (the close was 17.74), putting the validity of the breakout in question until GIGM regains the top of the pattern.

3. A Reversal candle that was very close to being a Bearish Dark Cloud Cover pattern, which is a Bearish Reversal Signal. In an uptrend, the pattern is a white candle (Thursday) followed by a black candle (Friday) that opens above the prior day's high, and then closes well inside the white candlesticks "real body."

Thursday's high was 18.25...Friday's open was 18.25, within one penny of "opening above the prior day's high." The close was within seven cents of being 50% inside Thursday's white candle, or "well inside the white candlestick's "real body."

Whew!

Hold all paramutual betting tickets, folks...this one's too close to call :)

I bought Thursday's open with a Limit Order of 17.36, two cents above Wednesday's high when I saw GIGM called higher at BID 17.30...ASK 17.40 on the Roth upgrade, with a sell target of 17.68...17.69 since the upper trendline was at 17.70.

Normally, I wouldn't even consider a trade like that, for only $0.32, but the body of evidence was so strong that GIGM would make a bid for the trendline at Wave 5, I decided to take the trade, and if it worked out, which it did, the proceeds would cover me for the next part of my trading plan.

The next part of my plan was to short GIGM on any close at or below the top of the pattern, at 17.70, with a stop above whatever the intraday high was, playing it for a Wave 5 Bull Trap. I liked the rally to a high of 18.25 on Thursday because that would give me a Bearish Inverted Hangman if I got my close at 17.70, or below. The tail would have been twice the size of the "real body," and my gain on the first part of trading plan would just about cover me if I got stopped out at 18.26, a penny above Thursday's 18.25 high.

In the home stretch on Thursday, when I saw that GIGM was set to close ABOVE the pattern in the high 17.90s, no way-y would I consider shorting that, even though, ironically, I'd be a few cents in the green at Friday's 17.74 close. But, my "shorting breakouts" days are long since over. That's a HUGE "no-no" for me, even if the trade would have ended up working out. The majority of bullish breakouts in bullish stocks are true breakouts, and I won't even consider shorting them.

Although Friday's close has the elements of reversal that I've enumerated, and we've got the Wave 5 "wrong-footed" elements that we've discussed, I also wouldn't short that close because of Thursday's CLOSE above the pattern, and because Friday's close was only pennies back inside the pattern. GIGM has been extremely powerful on this rally of the August low, and it's plenty capable of resuming it's current rally.

Because the chart has so many elements of a Bearish Wolfe Wave 5 Bull Trap, though, I'm also not willing to be long. And, I'm absolutely determined not to get caught "wrong-footed" here. I probably will somehow, anyway. LOL.

I'm dead neutral on GIGM at the moment.

Someone on the Yahoo GIGM Board asked me what my short and long-term predictions are, but I couldn't reply because I keep getting "Error Message 999...We can't process your request yap yap yap..." Grrr-rr...

ANSWER: I never predict anything because I'm lousy at it. I only can tell you what patterns I see, where the breakout/breakdown is, and what target is, or would be, IN PLAY, based on a measurement of that particular pattern.

By no means do the targets always get MADE. "It ain't rocket science," as the saying goes ;) Targets are simply "what we're aiming for." They can fail to materialize. They also can be exceeded by a great deal, like the THREE targets that were IN PLAY from the pattern breakdowns seen on this chart in June and July. The last of the targets, 11.45, MADE on July 26, but GIGM sank another 21.2%, to 9.02, in the August smackdown.

Thursday's upside breakout of the Bearish Wolfe Wave pattern put a target of 20.29 IN PLAY, but that's currently ON HOLD because GIGM closed back below the breakout. The target goes back IN PLAY any time that GIGM trades back above the channel, and remains above it. The top of the channel comes in on Monday, October 8, at 17.875.