#STUDY Gap and Crap, Gap and Go

A pattern worth watching is when a stock hits its historical low and churns over on gigantic volume which I loosely define as a turn over of float or close to it.  This is the gap and crap capitulation part of the pattern.  The follow up is the gap and go which signals the stock has undergone a change of character.

One recent stock of note is ELF with a float of 18M, 13M of which turned over at the historical low price during the week of August 10th.  50% of the float turned over on the day of the gap down.

ELF WEEKLY

On the daily chart the magnitude of the gap down is more clearly pronounced.  After the gap there was a sharp rebound followed by a pullback before a gap up on large volume. The gap low has held and price action tightens.  This signals the gap and go part of the pattern.  

ELF DAILY

Besides the backdrop of the overall pattern, the current price structure is exhibiting characteristics of a high probability upside breakout and continuation.  I tend to laser in on stocks that are within 2% of their 10 day average price, print a narrow range day, and have the lowest volume over a 10 day period. While this trade is in my wheelhouse, the drag of the overall market makes me circumspect.