GIGM: Possible Bearish Wolfe Wave/Bear Flag

(Click Directly On Chart For Better Viewing)

After studying this chart further, I really should title this post "Anatomy Of A Short Squeeze," because there were so many ways to get into trouble coming off the August 9.02 low.

1. At August earnings, GIGM gapped higher toward the broken Bear Flag and Broken H&S Top and closed on a "possible" Bearish Long-Legged Doji Star. Anyone shorting because they thought that "gaps have to get filled" was in trouble.

2. Anyone shorting the bearish looking candlestick was in trouble.

3. Anyone shorting because of the overhead resistance from the two broken patterns, starting at 12.43, was in trouble.

4. Anyone shorting because of the "Bearish" Golden Cross of 50/200DMAs was in trouble.

5. GIGM then went into a Rising Channel/"Bear" Flag. Anyone shorting because they think that those ALWAYS are bearish was in trouble.

Often, those patterns are bearish, but "the TELL" was when it broke out above the pattern, after 4 hits to both the top and the bottom of the channel, and more importantly, it CLOSED above the channel. And, on good volume. Uh-oh.

LESSON: Shorting the top of that channel with a stop above it is a reasonable play, but boy, when the market tells us that we've got it wrong, GET OUTTA THERE.

I'm glad that we have that pattern on the chart because the current "possibe" Bearish Wolfe Wave/Bear Flag looks to be a "fractal," or repeating pattern, and it could play out the same way. GIGM could close above the top of this pattern, currently at 17.70 and rising at the rate of 0.0875 each day, and go on another merciless, "take no prisoners" short squeezing rampage.

For that reason, despite negative divergences in indicators like RSI, and with MACD positioned for a downside slap shot, back-kissing its signal line after falling below it, I'd be very cautious about shorting this pattern, and 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).

If GIGM closes above the channel, like it did above the channel in green, on September 6, it could explode to the upside again.