Shares of GT Advanced Technologies Inc (NASDAQ:GTAT) got crushed on the news that the company filed for Bankruptcy on Monday. If you are one of the many unfortunate CNBC viewers who blindly followed the advice of the talking heads and bought shares of GT Advanced Technologies Inc, clearly you are not in a good position. It is never fun to watch a stock you own collapse in such fashion. Shares of GT Advanced Technologies Inc ended the session down by 92.76%
As I heard the news, I quickly took a look at the daily chart of GT Advanced Technologies. As expected, the chart of GT Advanced Technologieswas a screaming short (not something any knowledgeable trader/investor would buy).
Stock patterns and the trend for any given equity is something every investor/trader should learn and understand before entering any kind of trade. Whether it is a long or short term investment, the chart and news are a perfect example of this. As you can see in the chart below, GTAThad a clear trend line break down on September, 10th (as highlighted by the white oval).
There were many factors suggesting that this equity would drop a significant amount. Among others, please note how this particular stock was trading below the 20, 50 and 200 moving averages; a clear sign of a downtrend and a weak technical position. This is the first warning sign not only for shares of GT Advanced Technologies but for any equity. On September 15th, the stock confirmed below the red trend line, signaling that a collapse was imminent. As the 20 day moving average came into price (yellow line) shares of GTAT received the final spark needed for a massive drop. Stock charts never tell us what the catalyst will be, but they enable us to position ourselves on the right side of the trade, with a high rate of success when read correctly.
BY Kiliam Lopez