All right. So in this episode, we're going to talk about the beaten up bounce play stock charts that have been beaten up for a long time and now the stock suddenly starts to bounce off the low. Now this can be a little bit confusing because you look at the chart and it's like it's terrible. It's garbage.

This stock has been selling off sometimes for years. Why would I buy it now? So on the one hand I can understand that. On the other hand, think about it like this: If you have a stock that's been selling off for a long time and you can be getting in basically at alltime lows or very close to all-time lows, your max loss is very well defined as the low of all time. If it goes lower, you're out.

But if off of this low that forms as a base, we can then get a nice surge back up and it can lead to a multi-day move as the stock starts to gain momentum coming back up. Now, a lot of times when these work out really well, they're also combined with reverse stock splits. We'll talk about that in today's episode. Now let's jump onto the chart and I'll show you a couple examples of these trades today.

All right. So uh. one example today is Evax. All right.

So I'll make this full screen so you can see it better. So Evx is a chart that you could see. This thing has been beaten up. It's been selling off for a long time and now today right now it's up 130% It had a low, just a couple days ago of $3 Today it had a high of 1361.

That is an incredible recovery. That's the type of thing we like to see. And of course did I trade today. Absolutely.

We'll talk about those trades in a moment. But one thing I want you to also note is this s on the chart. This means the company just did a reverse. Well, they did a split and it's a reverse stock split of 10 to one.

All right, So this is very common. Let's look at another one we had. Um, Sprc today. Sprc is another one that I traded today and this is another chart that's been really beaten up quite badly.

I Mean the stock has. It's notable for its red candles. It has a ton of huge red candles. It sells off.

It's been selling off for a long time. We can keep backing the chart out more and more. You can see this is a stock that just keeps going lower and lower and lower. But notice right here again a reverse split.

This one was a 26 to1 reverse split and following that reverse split, that's when we started to get a little bit more action on it. So let's see. Um I'm going to. Yeah, that's fine.

So we got this reverse split and then we got a couple of days here. Red Candle Candle. Nice candle here. ended up being green pulled back and now it started to bounce again.

right here. But you notice this pattern. It looks so similar. The Gap up the sell off the Gap up, the sell off the Gap up.

a little bit of a sell off the Gap up sell off Gap up selloff. It's like it does the same thing each time. So I I could guess what it's probably going to do here. Nonetheless, there is opportunity in this volatility.

Okay, so let's look at the Whiteboard for a moment and let me talk about what this, how this chart kind of plays out. So the way this usually starts is a company will have their initial public offering. Okay, so the IPO and usually on the IPO day, you know they might squeeze up a little bit on the initial public offering and then usually there's a period of profit taking and it sells off. And then what we find is one of two things.

Either the company comes back up through its pre-market high, or it's uh, IPO high and begins uh Trend back up. Or what's more common, especially with these, uh, lower price stocks, is that they just begin this sort of downward spiral. They just go lower and lower and lower. Now, in order for a company to remain listed on NASDAQ or the New York Stock Exchange they have to keep their stock price above $1 a share.

Yes, they can dip below a dollar a share and they'll keep trading, but eventually they'll get a delisting notice and exchangers is going to tell them. Look, if you can't get your stock to the minimum price of $1 a share, you're going to have to go on to the OTC market. Now nobody wants that. So what does the company do? A reverse stock split? So the reverse stock split works like this? Let's say the um, you know the IPO here was $10 All right.

So $10 So now it comes down and let's just say it's 50 cents a share. All right. So 50 cents a share? We're below a dollar. They got the delisting notice.

They're like, all right, we got to do something. So they say, you know what, let's do this. Let's do a 10 to One reverse split and the next day the stock price will open and it's not 50 cents. It's going to be $5 a share.

Now the chart doesn't change so this actually goes up to 100. It makes it look as if it started at 100 because the whole chart just does this adjustment right based on the ratio of the split and now the stock is at $5 a share. But something else has happened. So if when they did the float, let let's just say when they did the IPO, let's just say the float was 10 million shares just also for the sake of argument.

Keeping it really simple, it was a 10 million share float when it was down at 50. and they do this 10 to1 reverse split. The the float gets divided by 10. That's 1 million shares.

So now the float has dropped down by the same ratio as the split. And what often happens is we'll see right around here the company will put out news. Headline news comes out here. It comes out very strategically because now the stock is priced above five, priced above a dollar.

in this case $5 dollar. It's more attractive so people see the news, they're more interested in buying it. The stock starts to move up and then we get this nice little beaten up bounce right here. Now what often happens is after a period of bouncing up, the company takes it as an opportunity to sell more shares onto the market.

So they go from a 1 million share float back to like a 5 million share Float by selling 4 million shares as a direct offering. If that happens, then what's typically going to happen is they announce the offering, the price drops back down. Maybe it doesn't go all the way to the low, but it comes back down and begins another downward descent until it's back at0 50. And then they do the reverse split again.

This happens again and again and again. and you know this is. this chart is a a decent example of it. They only have one reverse split on it, but it's a very common theme in the small cap world.

Now some people might think, well, jeez, you know if this is a theme, couldn't I or shouldn't I just short any small cap stock that pops up. Well, that's a littleit easier said than done. If you short any single small, every single small cap stock that pops up, you're going to be caught in the well. what about the anomaly events? What about the time where we have a small cap stock that does the reverse split and then it goes from $5 to 5075 or $100 a share? Obviously you'd have to stop out, but these the the fact is, when the float gets really low, these can go crazy.

And that's what happened with Drys back in maybe 2016. That was one of the first really big moves that I witnessed. It was a reverse split stock was like $4 or5 a share. It shot up to I think $117 It was insane and a lot of short sellers got completely destroyed on that.

So you have to recognize that these can be very risky to try to swing trade to the short side because when the floats are really small, crazy things can happen so you have to be prepared for that. Okay, now that's also not to mention the fact that if you're going to swing trade to the short side for a long period of time, you have to deal with borrowing fees and just you know. Naturally, the exposure risk, especially if you're trading on margin. Okay, so if we look at the Whiteboard what typically happens is we get this sell off.

we get the new and then this is where we get that that B that sort of, um, beaten up bounce play. So what I'm looking for? I'm not buying every single stock as soon as they have a reverse split. Just because they have a reverse split doesn't mean I'm going to be a buyer now. Some people take that approach.

I think that's a little risky. Yes, it's true that news usually does come following a reverse split, but I don't try to preempt it I wait for the news to come out and I wait for the market to react. So when the news comes out, that's the day that I'm focused. Okay, so what's my process then for finding these stocks to trade on any given day? So each morning when I'm sitting down here, I'm pulling up my scans just like this and I'm looking to see all right leading Gapper today.

evax top Gainer Top Gapper over here. All right. I look at the daily chart and I can very quickly realize that this is one of those you know beaten up stocks that sold off for a long time. All right.

Recent reverse split just a couple days ago. All right, it was a 10 to1 split. That means the stock was trading at like 60 cents a share. It jumps up to $6 a share.

Okay, the float has also dropped down by the same ratio of 10 because the reverse split. So then all of a sudden you see this stock starting to pop up. Does it have news? Yep, it sure does. Now, if you want to really get into the Weeds on this, you can pull up, um.

the SEC filings of the company and you can look for a shelf registration. Now on this one. Uh, let's see, when was the IP on this? This began trading? not that long ago actually. Um, it was.

uh well. no, it's 2021. So it was. It was a little while ago.

Um, still relatively new. But anyways. Um, so they have a shelf registration right here. This is S3 or F3 for a foreign company.

And so this gives them the right to do an offering at any time. up to 100 million shares 100 million. I'm sorry, up to $100 million. So this shelf registration.

It's important to know that a lot of companies have a shelf registration. It's a filing that they make that notifies shareholders that they're um, they may at any time dilute the stock to raise more money, right? You have to notify your shareholders of that. so they may sell more shares, diluting the value of everyone's shares to raise more money for the company. All right.

So now we know that this company has the Shelf registration. now if we want to go a little bit deeper, you could look. oops, You could look at their last filing and you could ask, Well, what was their balance sheet looking like right? You know, did they have which? What am I looking at here? you know, what was their, what was their cash on hand, what's their burn rate And then you can get a little bit of a better sense of like, Okay, you know how much money does this company have? What is the likelihood that they're going to do an offering? You know on day one here. Or is it possible that this company may be one that we see a couple days of some serious momentum? Let's look at Rvsn Rvsn.

Um, this is one that number of people were talking about. Uh, yesterday. So note recent recent reverse split right here 8 To1 it sells off a little bit more and for Traders that got in down here the all-time low was a dollar. It was $1 of course adjusted with the split, but still $1 alltime low.

So if you're someone who was getting in here at you know $2 or 250 I mean it's you never want us to get into something at $2 or $3 and stop out at a dollar. but at the same time your downside risk on this is very very clear that it's at this level and this squeezed all the way up to over $9 a share. Now one thing that I'll mention on this because some of you guys were asking about it yesterday. The thing about this stock that I did not like was the fact that we were seeing what I would call jack knife moves.

So uh, just Jack So a jack knife move means it's squeezing up here. It pops up to this high of 410 and then flushes all the way down to 342. Then it comes back up. Drops, comes back up, drops, comes back up drops.

Every time it came up to this 428 level drops. and then this time it goes. And if you're someone who traded it and made money on this, you're probably the same person who lost money here here here and here because there was no reason to think that this wouldn't do another rejection. This had all the writing on the wall that it was going to reject again.

In any case, it breaks, it, pulls back, and really, so you had one candle of opportunity on this one just to get really dialed in. And then it starts to pull away. but notice again. topping.

Tail Topping Tail topping Tail topping tail. It was fairly choppy, but yes, you did finally have a nice squeeze. Uh, you know, right around here from 650 up to 9 Is it something that I would have been super aggressive on at that time of day? Probably not. But in any case, I was out skiing with my kids so I missed it.

So that's the luck of the draw. Generally speaking though, I find uh that I do the best on these trading in the morning you know in the first two three hours of the trading session. So between 7 and 11: A.m. this this one started moving a little bit later in the day.

All right. So R Rvsn another example of this stock. that's you know, stock that's been selling off and then gets that bounce off the low. So today, uh, we had Evac and Sprc.

So we look at Sprc first. This was actually the first one that I traded today Sprc because it has this daily chart that just has this clear history of huge red candles. I I was cautious I was like I don't know about this one I really don't think it's going to work and check this out. look at that jack knife right there.

It pops up to 550 and then flushes down. then it comes back up, ascends a little bit higher and then drops back down. I Took this trade uh, right up here and got caught in this false breakout and I also took a trade on this one. um, right in here and lost when it zoomed and halted down like this.

I Found this one to be a little bit difficult to trade. uh and I actually am finishing red. Uh, $ 7554 on it, you know? I just I Didn't like the price action of it I kept the losses small. but I did go red on it.

The thing with this one was that unfortunately because of its prior history of having these big red candles, there were a lot of Sellers and short sellers that were eager to hit the bid on it. so every time it would pop up just getting those flushes. We got this one here, that one there, and then this one here. So and that was just sort of in that stretch.

There were some others as we go on, so Sprc I ended up being read on and I think the the determining Factor There was the fact that although yes, somewhat recent reverse split and it's a beaten up chart, it's already bounced a couple times and each time it fails. fails, fails. This is a pretty epically terrible chart with these red candles. This one's bad.

Okay, but then Evax. Well, this one's different. So I ended up locking up some profit on evax. and although this one as I look at it does have some bigger red candles.

What we had going for us on this was the stock was moving pretty fast and we had a nice pop after hours on news. So after hours we had this pop up on news up to about $9.80 That got things going pre-market It sort of sells off, sells off and then right here at about 7 about 8:30 it breaks the volume weight average price, pulls back and from this point forward, it's game time. so there are opportunities right here over 825 for the move up to this high of 930. Then we had a flat top breakout right here.

didn't really go, drops down and then it halts up right here. and then there was a nice setup here where it uh, resumes higher, pulls back and then it curls up. So my first trade on this was break a Vwap right here I got back in right here and I traded it right here right here and I gave back a little profit right here I didn't trade it at the open I was like I'm going to give this a second to sort of work itself out, but then after it resumed I traded again right here for this leg up I sort of felt that at the open I wanted to give it a minute to sort itself out I wasn't sure how well it was going to hold and these four green, four uh, red candles were all pretty high volume. so when it Ed up here I was like H I don't know.

but once it started to curl up, I was like okay, this may give some more opportunities even right now I would say hey, this one's still holding over volume weight, average price it's holding, you know relatively well. it did dip below the 200 moving average on the daily chart. Usually a perfect setup on the beaten up bounce is going to have a lot of room up to the 200. This one you know the 200 was a little close as well.

you know, kind of close there but then broke through it sprc the 200 on this one. let's see where it is. this one's got some nice room to the 200. You know that's what we like to see, but it already tested it once and then failed.

So you know I think that that's um, sort of the reality. but I think one of the things to be aware of is that right now because the market is starting to rebound after. you know, being over a year in a bare. Market We have a lot of small cap stocks that have gotten beaten up really badly and that means there's a lot of daily charts that are looking kind of like this.

The stock is sold off a lot, which means there may be some opportunities for a little bit of um, you know I don't know, bottom fishing, bottom feeding, and looking for opportunities to catch some of these reversals back up. So as always I'm not going to try to anticipate which one is going to bounce I'm not going to look at make a watch list of you know, dozens of daily charts that have been beaten up. that's a waste of my time time. What? I'm going to do instead is I'm going to wait for the stock to start to bounce and once one starts to bounce, I'm going to try to jump on that momentum as early as possible.

So in the case of Evax jumping on that momentum as it broke over Vwap, that for me, made a lot of sense, right? Uh, Evax? So Evax is a broke over Vwap, You know, right down here. Yes, this made a lot of sense. Uh, right in this area. let's see, it was right in there and then, um, right in here for pullback.

So once it starts moving I'm interested. at that point, it's game time. but trying to buy something that's just going sideways or has no volume, you're you're just going to get stuck holding it. You're just G to be sitting and waiting and hoping that news comes out.

but in the meantime it could continue to go lower and lower. and lower and lower. I You know I've heard of people over the years who have tried to find approach. for you know, how can I buy these stocks before they make this move? Yeah, well, you know it' be really great to be able to predict the future to that extent, but we can't We don't know.

So I wait for the stock to start to move and then once it's starting to move I look at it and usually it's because news has just come out. either that day or the previous day and that's the Catalyst that's giving it this push. So at that point, momentum is there. If the stock is really strong, it's going to be obvious thousands and thousands of Traders are going to be watching it and that's going to create even more relative volume.

That's going to give better resolution on these patterns as they start to break out. and then that's where we're going to see some really nice action. So my thought is that in the coming weeks and months, we're going to see a lot of these types of chart patterns where we've got a stock that has been beaten up for a long time, has had a number of reverse splits to keep it above a dollar. The flow has gotten super super super low and now in a bullish.

Market you know, stronger Market bullish. We see buyers coming in and we get those really dramatic squeezes off the off the lows. That's what I'm thinking we're going to see more of. So I Hope you find this interesting as always.

If you do, make sure you hit the Thumbs Up And subscribe to Channel and I Want to remind you as always that trading is risky and my results aren't typical. So manage your risk, take it slow and I'll see you back here first thing tomorrow morning.