Based on the steady decline represented by EK's annual chart and Friday's panic driven sell-off, it only makes statistical sense that EK will soon be the proud recipient of a Dead Cat Bounce rebound. The question is when?
The massive drop was due to an unsubstantiated bankruptcy rumor that began circulating institutional trade desks around 2pm EST. As you can see by the chart illustration below, at 2:17pm, the stock dropped from $1.68 to a intra-day low of ¢.54 at 2:40pm. Not only was this print a new intra-day low but it also represented a fresh new 52-week low, before settling in around ¢.81 per share. All of this activity in less than two hours. The only leading indicator seemed to be a stochastic crossover intersecting at 25.00 around 2:16pm before bottoming out to 0 at 2:19pm for approximately 30 minutes.
So did we already miss the long entry? One positive was EK longtraders positioned up with a 30% price retracement in Friday's after market session. Did the Dead Cat Bounce already happen? I don't think so, as there was no pop in the price. For me, the 30% giveback was a nice jester based on the market trying to correct itself but the major indicator is going to be the pre-market on Monday. If EK's pre-market trades show an overall positive sentiment then seeing a large pop at the open is all together a possibility and therefore worth taking a long entry position.
Read our pre-market report on Monday and see if EK is ripe for a long entry.
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