The technical (stock chart) picture for Trump Media & Technology is sagging. Following last week’s merger jump, this weakness is reason for shareholders to worry.
To prevent a further selloff, the stock needs to exhibit strength. When? The sooner, the better. Friday (April 5) would be good.
Here is the technical evaluation…
First, the stock action from the 2021 beginning
The relevant part of this history is, first, the run-up when investors learned that Trump Media was the merger target. Then, second, last week and this after the merger completion. The signs of weakness are this week’s partial reversal of last week’s rise and the decline below the $50 barrier.
Second, this year’s stock moves and trading volume
The stock movements are clear, showing each minute’s final trade price. The trading measure, “on-balance volume,” weights those stock moves by the number of shares traded. Because of high trading volatility, using a minute-by-minute time period captures well what is happening.
Note two periods.
First, the initial speculation that drove the stock up to $50. Following was the waiting period, when the stock moved around a bit, but the on-balance volume maintained its higher level.
Second, the merger completion, with price and on-balance volume rising. However, as the price dropped back, the on-balance volume also reversed. The implication is that the added support for higher prices is gone for now.
What could turn that volume measure and the stock price back up? Some cause for anticipating a higher valuation in the making. In other words, some fundamental growth driver.
Third, this year’s candlestick chart information
What is a candlestick chart? Here is the description:
Understanding a candlestick chart:
. Green bar = stock opened at bottom, rose, and closed at top
. Red bar = stock opened at top, declined, and closed at bottom
Thin vertical lines = intraday moves above and below the colored bars
Last week started with a healthy jump above the $50 barrier. However, the stock then stagnated. Each day the stock would open higher but would then decline to the close. That pattern showed there was no uptrend at work.
Now turn to this week. Monday was a confirmation of the previous week’s weakness, The stock opened lower, then declined back to the $50 barrier. Tuesday and Wednesday were wait-and-see days.
All of that slip-sliding makes Thursday’s decline a real concern.
So, Friday’s (April 5) action is especially important. If the stock rises well above $50 on higher volume, it will both ease shareholders’ worries and serve as a caution light to short sellers.
On the flip side, if the stock cannot rise (or, worse, declines further), the possibility increases for a significant downtrend ahead.
But what about fundamentals?
Widely discussed are Trump Media’s low sales and negative earnings. While growth and success could be coming, today’s reality offers no support its high stock price.
As to a possible rosy future for a listed common stock, investment analysts will need to examine Trump Media and determine a valuation based on reasonable assumptions. Naturally, that analysis requires an openness on the company’s part, with explanations of strategies, operations, and finances.
When will that happen, and what will be the results? Probably not soon enough to prevent Trump Media from following the downward path of most SPAC mergers.
The bottom line – Trump Media is no longer a speculative stock
It is a new day for Trump Media. Yes, it has new cash, but its stock price is high relative to its fundamentals. Moreover, there is no special future potentiality to speculate on. Therefore, if the stock doesn’t jump above $50 on Friday, holding on looks especially risky, and searching for another investment looks especially promising.
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