GPRO Trade Set-Up

All I keep seeing everywhere is the market is not a bubble, "This time it's different", the managers who have reduced their equity holdings or completely dropped them, the insiders buying back company stock and selling their shares and now the latest in a long line of "This market is a bubble", Mark Cuban.

However one of the moments that will stick with me the rest of my life just like at the 2007 top, was on CNBC yesterday, I didn't see it live, but it's such a textbook example of the "Irrational Exuberance" found at market tops, which I'd much rather hear than a bunch of well respected guys calling a top, the market tends to like to surprise people.

In any case that brings us to the flop that has been GPRO as it has essentially round-tripped in less than a year. I don't know much about their product, except I got a Polaroid version of the "Action" type camera, water proof, small, can mount to anything and takes High def pics and vids and while it may not be as good as a GPRO, it's half the price or less and it's darn good for me as far as surfing, snorkeling, taking underwater captures of my reef tank or just an easy camera to carry around in my pocket with a cool wide-angle lens.

All of that being said, no one cares, it's which was is the stock going and GPRO doesn't exude confidence on my part any time in the near future.

Thus, my earlier post about a GPRO bounce probability and trade set up, I'd personally let the trade come to me and that means let it bounce if it can, if it can't, no harm, no foul, it's an idea that didn't pan out with nothing on the table. However if it does see a counter trend move/bounce, then it looks like a fantastic short set-up because GPRO doesn't have to stop at its IPO issue price, it can theoretically go to zero.

Lets get to the charts and the idea...

 At least this is one decent example of how volume should look in a rally. At the white arrow, volume should increase with price, that hasn't been the case under the QE regime because money was just being dumped in to banks and the market by the F_E_D, but it seems like the important basics like volume analysis  which a whole new generation of traders have grown up knowing or caring nothing about, is coming back with a vengeance and will give you an edge even with a basic understanding.

While I may not be correct in drawing a Descending Wedge on the chart as volume is not correct for such a formation and for other reasons, I do think the narrowing price range will act similar to Bollinger Bands that are squeezing and cause a highly directional move in price, that doesn't mean the move will stick, but this concept has been around for a century in TA from consolidation patterns to tops and bottoms. T

The heavier volume near the lows in yellow is somewhat indicative of a capitulation event. I believe it was just yesterday in talking about volatility that I mentioned that a capitulation event is usually not the bottom although many consider it the end of a trend, we typically see price drift lower for a period  before a bottom is found and in GPRO's case, it may very well just pop and drop, that's the trade idea any way.


 The daily 3C chart shows that the buyers and sellers were pretty transparent about this one, they got in, they got out, not too much in the way of game playing and the daily chart is confirming price action for the entire chart, note that it is not showing any kind of divergence that would suggest GPRO is finding a true bottom.

 You know my custom DeMark inspired Buy/Sell indicator and you can see the buy/sell areas in red and green . You can also see a MACD Histogram divergence, typically you want 3 divergences with this indicator before you get a move or reversal which is what we have.

However while they have diverged on the lower end of the histogram, they have not increased on the upper end as I drew in white on the right side, so this again tells me a pop and drop would be a likely outcome.

 This is the same indicator taking it a step further to a 60 min chart, while there's no current buy signal (which I probably wouldn't do any way, at least the way it looks now), that may develop giving us a better handle on timing.

 The 60 min 3C chart does reveal some divergences as it is more detailed than the daily. I tried to mark the positive and negative divergences by appropriate size, again note there's nothing strong or positive at the local area so once again I see this as more of a pop and drop set-up and I'd much rather short the drop than buy the pop, but if things change, I will change with them.

 On the 5 min chart we see some divergences and an interesting looking positive recently, rather strong for the area, but I don't quite see the base yet which is of little importance to me at this point as I'm not interested in the buy side, I'll simply set upside alerts to let me know if it has moved and then I'll look for the trade set-up/entry.

However once again, if the dynamics change and the long also looks like a decent trade, I'd certainly be happy to take two trades rather than 1.

 The 3 min chart is more of a timing chart and it is starting to develop as well. I'd rather see stronger signals here as far as timing, but once again, all I really need is upside price alerts unless the bottom area starts looking better for a potential piggy back trade.

And the 1 min chart. This chart should really shape up and give a decent signal before any solid bounce, but once again at this stage it doesn't matter, I just need upside price alerts to let me know if the move up has taken place, then the work starts of looking for an entry and making sure there's distribution in to the pop, confirming the trade-set-up.

So I'll keep this on my watchlist just in case the bottom area does improve and is worth consideration as a short term long or call play, otherwise, I'd just set some price alerts above the upper trendline of the descending wedge I drew, in the $45, $47.50 and $50 area.