GIGM: Bullish Key Reversal - Bullish Wofle Wave

(Click On Charts To Enlarge)

Chart #1 - Daily: This chart not only is an illustration of "BUY the rumor of good news (the May earnings)...SELL the release of good news (GIGM topped the following day), it's also an illustration of how brutal this bear market has been. From the May earnings high of 19.86, GIGM lost 87% of its value at its November 21 low of 2.64.

"When the news is great (May earnings)...you probably are too late" and "Buy when there's blood in the streets (November 21 low)." Those market maxims sure make it sound easy to play the market, but we all know that it isn't quite that simple. LOL. For that reason, I try to look at the "body of evidence," to see if the market is telling me anything.

Chart #2 - Bullish Wolfe Wave: Catching exact highs and lows is very difficult because, by definition, we are "shorting new highs" and "buying new lows - catching falling knives," both of which are a "no-no," but we can come close when the high or the low is a big reversal day, like GIGM had on November 21. It printed a new low, then rallied and closed above the prior day's high, putting in a Bullish Key Reversal candle on the day.

Additional evidence of a significant low was that the Bullish Key Reversal also was at a Bullish Wolfe Wave 5 "Fakeout/Breakdown." Confirmation of the "fakeout," was a rally back inside the pattern, rather than a continuation to the downside, which the November 19 pattern breakdown suggested. We can see that at the Wave 5 "breakout/breakdown," the proverbial everyone was put wrong-footed. Bears shorting the breakdown got faked out, shorting into the hole. Bulls who finally capitulated on the obvious breakdown also got faked out. That's THE hallmark of a Wolfe Wave, in my view. The greatest number of people possible are disappointed, and they don't get much of a second chance to correct their mistake, if at all. The market reverses direction from there.

After a five-day rally off the 2.64 low, GIGM settled in and put in a Bullish Falling Wedge pattern (pattern in blue), a bullish continuation pattern. During the Bear Market off the May high, GIGM did nothing bullish. The December 8 upside breakout of the Bullish Falling Wedge, following the November 21 Bullish Key Reversal, indicated a "sea change" in the stock. That gave us a second piece of evidence that the bearish behavior in the stock had changed to bullish behavior. Confirmation of that was the 5.37 Bullish Falling Wedge target getting MADE on December 11, just below the top of the Bullish Wolfe Wave pattern (in green).

The declining 50 day moving average coincided with the top of the Bullish Wolfe Wave, so that DOUBLE resistance "should have" put a lid on any further rally, and it would have suggested the possibility that the rally in GIGM was nothing more than a Bear Market rally that was finished.

Instead, we got further evidence of a "sea change" in the behavior of GIGM. It broke out of the Bullish Wolfe Wave to the upside on December 12, at 5.54, and at the December 18 high of 6.69, it was up 153% off the November 21 low of 2.64. Whew! Who cares if this is "just a Bear market rally," or if GIGM ever gets to the target line (Green #6)? Investors hold many stocks through multi-year Bull markets and don't achieve the kind of return that GIGM had in just one month's time! LOL.

GIGM certainly got overbought on that rally, and it put in a Bearish Engulfing pattern on December 18. The 20/50DMA's also are inverted, so the stock is "ahead of itself," but on a selloff, it's got some support below it, i.e, the moving averages and the top of the Bullish Wolfe Wave.

My main point here is about the "sea change," and about the fact that stocks like this are very playable based on the Bullish Key Reversal and the two pattern breakouts, even if it does turn out to have been "just a Bear market rally."