Well, I hate to be the one to say I told you so, but, I told you so. Back on November 22nd I told you the gain from Liquidmetal Technologies Inc. (OTCBB:LQMT) was no ordinary gain. It was a catalyst for a much bigger bullish move. See, with that day's advance, LQMT hopped above a nagging resistance line. The end result was a stock that was not only proverbially free to move about the cabin, but a stock that had proven it had already established some upward momentum. Sure enough, Liquidmetal Technologies shares are up 47% since then. You're welcome.
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I don't come here to gloat about my call on LQMT though. I'm reprising my look because, thanks to this month's volatility, the uptrend is once again threatened - at least in the short run - and some decisions need to be made.
First things first. We can now look back on the daily chart of Liquidmetal Technologies Inc. and recognize that the wedge shape I was talking about a couple of months ago did its job.... squeezing the stock to a point where a breakout was inevitable. Thing is, after a few months worth of squeezing, it was going to take at least a couple of months for the chart to make up for lost time. But, it was worth the wait. LQMT is well up now, and plenty profitable for anyone who took a swing then.
The question is, now what? The stock's going nuts to be sure, but it looks a little too hot for its own good.
To answer that question the first thing we want to do is take a step back and look at the bigger picture... a weekly chart of Liquidmetal Technologies. We can still see the wedge pattern in this timeframe, but more than that, we can gain some perspective on what's going on with LQMT. Yes, it's bullish in the short-term, but better still is the fact that it's also pulling out of a long-term funk. Even better than that is the fact that we're finally seeing higher-volume buying that's persistent - one of the missing ingredients with the prior recovery efforts.
Still, LQMT is wickedly overbought in the short run. How does a trader handle that? Incredibly enough, this is NOT a situation where a trader would want to set a stop loss in place and just deal with whatever pullback happens to hit the stock before the next bullish leg. This is a case where the smart thing to do is to lock in the gain, head back to the sidelines, and then what and see how, it, and when the buyers regroup. I'd be willing to stick with a 20% gain and ride it out. We've got more than a 40% gain in Liquidmetal Technologies to protect though, and that gain could be cut in half by the end of today. And, as overbought as it is right now, I'd be very surprised if the stock didn't pull back to the $0.18 area real soon. I'd be a buyer again there, provided the 20-day moving average lines and the highs we saw in December acted as a floor.
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