The rising price channel that has been developing over four months in Cytodyn shares has finally broken to the downside, prompting a reassessment of the current trend, and calculation of probable price targets. Figure 1 shows the daily candlestick chart.
The breakout of the channel was convincing for a number of reasons. Observe the price action immediately following the first time price fell below the trendline labelled TL2. Firstly, the candlestick from February 22nd opened with a substantial gap down and closed with a long real body clearly below the trendline. There was a prompt retest of the trendline on the 24th and 25th of February, but TL2 held as resistance and price has not managed a single close back above since. The share price is now falling away from the trendline again, and looks ready for a more substantial move to the downside.
One conventional way to calculate price targets from parallel channels is using the minimum 1:1 price projection targets based on the height of the channel. Study figure 2.
The vertical distance between TL1 and TL2 is measured and labelled X. Note that since the lines are parallel, it does not matter where along the channel the distance is measured from. An exact copy of the distance X is then projected downwards from the point of breakout. This is shown by the grey box labelled “Copy of X”, and leads to a 1:1 target of $1.3977.
Downside support targets can also be calculated using equality projections based on the swing from the high labelled A and the low labelled B in figure 3.
A box is drawn to encapsulate the swing AB in figure 4. The box is used to measure the height of the move. Note that the width of the box is of no significance whatsoever. It is merely being used as a measurement along the price axis, not along the time axis.
In similar fashion to the method used in figure 2, the box is copied exactly and projected downward from the high at point C. To think of the equality projection concept in terms of swings, we’re anticipating that a decline from C to a new low is likely to be roughly equal to the decline AB, in terms of price. This leads to a target of 1.5596. With both targets landing in close proximity, we can expect that if a more severe decline does unfold for Cytodyn, there is a very good chance it will find support from the 1.3977- 1.5596 range. It will be very interesting indeed to watch price action unfold for this stock over the coming days and weeks.