A (somewhat sketchy) trade has been going on in Corporate Finance recently. It turns out, if you announce “crypto treasuries,” it causes your stock to pump higher as low-information momentum traders place market orders.
There’s a lot of market participants that want this to happen. Sometimes they own warrants and want higher prices to lock in gains. Maybe they’ve got convertible debt they want to get rid of and need shares higher than their strike price.
Or it’s the company’s executives that want to make sure they have a cushy salary for the next few years.
These games are played in the market all the time and are not for the faint of heart.
Like Sharplink (SBET):
This stock gapped from $6 to $30 overnight. There was an announcement of a private investment of public equity (PIPE) of $425mm in order to buy Ethereum, a crypto token.
(Try explaining that to yourself in 2013.)
The stock had a pop, then a short squeeze, then an unwind. Normally the stock would start cratering, but it held, and managed to retake the catalyst day open.
It ran to $120.
That’s not the wildest part. I want you to check out the volume for each day:
The second squeeze had half as much volume. Because there’s no liquidity. Just like the company wanted.
A few weeks before the announcement, the company issued a 1/12 reverse split on the stock.
12 shares were converted to 1. This drastically reduced the supply of shares available… and when there’s no liquidity into a big gap up, and shorts are forced to cover…
It can get ugly.
According to finviz, there’s only 630,000 shares float. That’s incredibly thin.
I can’t know for certain if the entire thing was engineered…. but I do have a “reverse split” screener that I pull up every once in a while to see if a smallcap is about to run.
A Simple Hack to Be Early
I’ve got two names on my “buy the dip” watchlist. The first is Archer (ACHR), which is making vertical takeoff and landing (VTOL) aircraft:
The second is UBER:
They’ve got similar structures. Big breakout behind a catalyst, but nobody wanted to chase and they’ve had a full momentum reset.
But I don’t know when these are going to turn around. Because I’m always early on buying the dip.
I have a fix.
There’s an indicator called the “anchored volume weighted average price” — AVWAP for short. A decade ago, it was a huge pain to get this on your charts, and now it’s native to most platforms.
That means every trader is going to “anchor” their VWAP to the recent highs, and then only take it long if the stock gets back above it.
Which is a solid idea! It keeps you out of trouble and a little disciplined.
But what I’m doing now is a (t+2) VWAP.
Here’s how it works. If you have an obvious AVWAP, just shift it over 2 days. I’ll show you in ACHR:
The top yellow line is where most of the eyeballs will be. But what I’ve found is that it is now acting as a magnet, and you can get some cheap upside out of it as you anticipate the roll higher.
The lower yellow line is just shifted forward two days. It’s going to trigger earlier, and odds are if that AVWAP breaks, there’s going to be a fast push to the second one.
This isn’t any kind of rocket science… it’s all about positioning and where market participants are most likely to trade.
Of course, I’m still finding setups using my time-tested stock roadmap strategy – click here and I’ll give you a complete walkthrough in a video training.
