Exela Technologies Consolidates Following Massive 100% Climb: What To Watch

Exela Technologies Inc XELA spent the last two days mostly consolidating after skyrocketing 103.9% on Wednesday, which Benzinga called out was likely to happen that day.

The huge move higher came after the company enacted a 1-for-200 reverse stock split, reducing its float to just 6.4 million shares, causing demand to outweigh supply.

On Wednesday, Exela reacted positively to the bullish engulfing candlestick printed the day prior but ran into resistance at $8.92. When the bulls were unable to drive the stock up through that level, the stock began consolidating, and on Thursday the consolidation took the form of an inside bar.

An inside bar pattern indicates a period of consolidation and is usually followed by a continuation move in the direction of the current trend.

An inside bar pattern has more validity on larger time frames (four-hour chart or larger). The pattern has a minimum of two candlesticks and consists of a mother bar (the first candlestick in the pattern) followed by one or more subsequent candles. The subsequent candle(s) must be completely inside the range of the mother bar and each is called an "inside bar."

A double, or triple inside bar can be more powerful than a single inside bar. After the break of an inside bar pattern, traders want to watch for high volume for confirmation the pattern was recognized.

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The Exela Chart: Exela’s inside bar leans bullish for continuation because the stock was trading higher before forming the pattern. On Friday, Exela looked to be opening within Thursday’s range and may form a double inside bar pattern to continue consolidating.

• If Exela breaks down from the inside bar pattern, the higher low could occur on Friday. If that happens, bullish traders want to see the break down take place on lower-than-average volume.
• The consolidation is also taking place under the 50-day simple moving average (SMA), which is bullish. If Exela can regain the 50-day SMA over the next few trading days, bullish traders will become more confident. Bulls would also like to see Exela continue to hold above the eight-day exponential moving average (EMA), which could continue to guide the stock higher.
• Although Exela negated its downtrend, the stock hasn’t confirmed a new uptrend by printing a higher low. If Exela breaks up from the inside bar pattern and regains the 50-day SMA, the stock may fall to backtest that level, which could cause the higher low to form.
• Bearish traders want to see big bearish volume come in and break Exela down under the eight-day EMA, which could cause more downside pressure.
• Exela has resistance above at $6.48 and $8.92 and support below at $3.60 and $2.83.

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