The 7% pop we're seeing from Liquidmetal Technologies Inc. (OTCBB:LQMT) today is impressive, but we've all seen big - and even bigger - gains from stocks before. What makes this one any different than the hundred of other stocks that dole out one-day wonder gains on any given trading day? Well, as it turns out, there actually is something significantly different with the way LQMT is flying high today.
It's not apparent with just a quick glance of the near-term daily chart of LQMT, but when you zoom out to at least a few weeks' worth of time, right there it is - Liquidmetal Technologies has been getting squeezed into the tip of a wedge pattern, and when enough became enough this week [and the stock had no more room to bounce around], that was it. Shares exploded, to the upside, and now that they have we should be getting a few months' worth of pent-up action.
The daily chart of Liquidmetal Technologies Inc. below tells the tale. The wedge, or triangle pattern, is framed in red. LQMT has been trapped inside it - and has been testing both edges of it - since July's big surge, but hasn't traded outside of those boundaries since the top materialized then. Indeed, the stock's been oddly stagnant, content to move sideways, so much so that all of the shorter-term moving average lines have converged this week. As they say though, periods of high volatility are followed by periods of low volatility, and vice versa. So, after four months of not only no net-movement but increasingly-constricted movement, not only does some major (and new) action make sense here, it's to be expected. Better still, it's to be relied on. Translation: Let's take today's break above the upper edge of the wedge as a sign that the ball is rolling again... bullishly.
As for where LQMT might end up hitting its next ceiling (which would be a great spot to lock down any profits), there's something of a ceiling around $0.20, where it peaked in July and started to form the upper edge of the triangle pattern. That potential gain doesn't really reflect the complete upside that's born out of the four-month wedge-squeeze setup though. That's just a "checkpoint" target where we'll want to reassess. More realistically, $0.23 would be a good first target to aim for, and assuming the rally doesn't stall there, there's been a lot of turbulence around $0.33 that would make for a good stopping point.
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