As you can see from the chart there has been a long term steady decline in this issue. The most recent decline has been in connection with a dramatic increase in volume. In addition to the volume spikes increasing in number they are increasing in intensity. Traders should be acutely aware of these types of volume spikes and recognize the price consequences that must follow. You can be certain that Insiders were accumulating at the session lows.
When a double bottom occurs to the accompaniment of an increase in big block activity and heavy aggregate volume at the low, you can be sure that Insiders are establishing positions. When the price is dropped on the first downward leg The Designated Market Maker accumulates a considerable amount of stock from the panic selling. I believe the double bottom exists because on the first leg up he does not want to supply the market with inventory from his own account. He wants to keep that account intact. He does not want to sell his stock anywhere but at the high. I also believe he is trying to capture as much of the float as possible.
That said, he supplies the demand by shorting the stock. This would explain the gap up on the first leg up. He does not want the general public buying in at the bottom. This necessitates the second downward leg in order to cover his short positions and/or accumulate additional stock.
After he covers his short positions he will then begin the second leg up and complete the double bottom. Once again he is attempting to capture as much of the float as possible.
I believe Supervalu (SVU) has reached the terminal phase of this decline and a reversal of the trend is in the offing. I further believe that an advance is commencing. The reasons are clear. On or about April 30th there was an increase in volume of approximately 800%.
The importance of this heavy aggregate volume and big block activity cannot be overstated. In addition to the obvious support/resistance levels in the chart, notice that the greatest fluctuation in price had their swings while occurring to the accompaniment of much higher volume levels. Note as well that the greater the volume, the more decided the move in price.
The double bottom is used by Designated Market Makers to accumulate stock for themselves prior to a big rally. At the same time he acts like a train conductor getting other exchange insiders on the gravy train. If it was not for the fact that they are assisting BIG money on and off of the gravy train it would never be allowed.
This Issue fits our trade profile very well.
The Trade - Buy 1/3 of your total position at $5.25 and the remaining 2/3 at $5.00 (if given the opportunity) with a stop out at 4.75. Do not post your stop out. Take Profits at $7.00. Wait for a pullback of $.50 and buy back in at $6.50 depending on the Volume and block activity.
With regard to the blocks below: They are extraordinarily large in size which leads me to believe that extraordinary price consequences must follow will also be extraordinary. These blocks (in the aggregate) are representative of 12.5% of the float.
That' it for now … have a nice day…
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SVU over the next 72 hours.