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Playing the Long-Term Trends in a Stock


Altisource Portfolio Solutions is a strong growth company in the right sector at the right time.

How many times have you bought a stock and then a few weeks go by and you get frustrated with lack of real net movement? You see all kinds of other stocks moving every day and finally you give up, sell your stock, and go chase another one. Inevitably what happens in many cases is that you find out later that your instincts were right and your research was correct, as the stock you gave up on finally takes off, leaving you frustrated.

Sometimes it helps to understand the long-term picture of a stock cycle and try to determine where you may be at in the big picture. This way, you may be more willing to sit on a stock a bit longer, understanding that it may need some time to work off a prior large move to the upside.

Stocks often consolidate in Fibonacci periods of time, as those revolve mainly around sentiment related to the stock or the company itself. You can see big up moves that come out of nowhere and last for several weeks, and then many weeks of consolidation or mild decline. These are actually crowd behavioral movements playing out as sentiment swings from too bearish to overly bullish and back again.

In the sample below, we outline Altisource Portfolio Solutions S.A. (NASDAQ:ASPS), which is a strong growth company in the right sector at the right time. We can't be sure that this stock will break out to the upside, but we do like the fundamentals and the catalysts ahead. At my firm, we look for both technical and fundamental marriages as it were, and then do our best to time the entry and exits accordingly. ASPS plans to spin out two divisions as a stock dividend to shareholders in the next 30 days or so, and we think that will catalyze the shares as sentiment turns north.

In the meantime, the stock trades between $100 and $107 per share, frustrating anyone who expects an immediate pop. Taking a look at a multi month chart with weekly views, we can see that this actually has been consolidating for several weeks in a normal pattern. In this case, the 20-week moving average line seems to be the bogey for this stock cycle for ASPS. As we approach that line, we may see a shift back north in sentiment. Should we be wrong, we will know if the stock breaks down materially from this crowd pattern in play now.

Click to enlarge

Above is the chart as of November 29. Let's see how it plays out.

Twitter: @activetrading

Editor's Note: David Banister is the chief investment strategist and co-founder of, a small-cap portfolio and market advisory service.

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Our ATP service has recommended a long position in ASPS within the past few weeks.

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