Several problems existed in this idea in terms of live price action deciphering.
When the security reacted to the rumor news it was "fresh" and white hot, with momentum carrying the moves, making it possible to sell to the greater fool for the early finders of the opportunity. Certainly a many candles late entry would have been overly risky, ask the buyers at six bucks about that.
A few in the peanut gallery tried to throw their hats into the ring long AFTER the price went vertical and faded significantly, when it seemed to be spiking. They did so at a moment in time when the bulls had already attempted and failed an earlier rally run at the initial highs. Please refer to the following intraday chart:
Setting aside any arguments over whether fib levels are scientific or useful, many went on this indicator. I told the room live that the landscape did not suggest a long, but the strength on the day possibly precluded a short, without an easy cue provided by some decent, lasting sideways price action with a support level clearly defined and breached from above. I did not see that currently, and being conservative, I did not short ABIO.
I want to see some clear technical level breached decisively. I want to know the odds are stacked favorably.
Having the right understanding of these matters will improve the quality of both your entries and exits.
If any play existed here, it was likely a short, given the previous price action cues, even if they were not screaming off the page to suggest an easy fade was there for the taking. Prices were less than 50% off the highs, so I felt the best trade was no trade, which is often the best position to take in such cases.
The urge to long the stock occurred AFTER the prices attempted to retest the high and failed, and AFTER (if I recall correctly) the bulls tried and failed to take even the second spike high out. That meant each attempt to make a new high was met with a lower peak result. Worse, the volume since the initial run had been fading steadily for a few hours by then, so it was an even worse bet.
Sure enough, the latest timid spike was short lived, and it gradually faded and drifted sideways into the close.
I did not think the long was good risk to reward because my understanding of price/volume/range/ did not suggest that the outcome was likely to lead to a sustained move to the upside.
Live, *changing* price/volume/range action is usually better than any one indicator in gauging the direction of wind that is blowing.
It is even typically better than several indicators, because it is one of the few things in the markets tending toward non-subjective interpretations if you know what you are looking for applied in correct context. Indicators can be misused and applied in situations that are inappropriate for their use, far too easily.
I am not suggesting indicators are all bad or useless, but there is something to be said for keeping it simple.
Read the following articles on this subject if you wish to continue studying these concepts:
http://www.dacharts.com/articles/Buffy_on_price_action.php
http://books.google.com/books?id=GrDQYq-ChpUC&printsec=frontcover&dq=price+action&source=bl&ots=xOOSliOxJw&sig=Y3He1rYrVk_7JQgvsOHGPB8owf8&hl=en&ei=_MrUS8HSEsL78AbLsezFDw&sa=X&oi=book_result&ct=result&resnum=6&ved=0CCoQ6AEwBTge#v=onepage&q&f=false
In the end, this is an experience related topic, and the subject exceeds the basic info provided in the links. You have to spend a lot of screen time and come to know landscapes related to situation specific trades.
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