RCAT showed notable strength today, and I want to walk through some of the key indications that told me this stock was setting up for a higher move. Above is a 5-minute chart of RCAT, with the SPY shown in the lower pane for comparison. Right from the start, the relative strength stood out.
From points A to B on the chart, the SPY continued to push to new lows, clearly signaling weakness in the broader market. RCAT, however, refused to follow the market lower and instead put in a higher low. This is a textbook example of relative strength. The pattern is always the same, when a stock won’t go down while the overall market is under pressure it’s a strong indication that buyers are stepping in and taking control. That divergence immediately put RCAT on my radar.
As the session progressed, RCAT began to tighten up and eventually pushed through resistance. Once that resistance level was broken, the stock continued to move higher and finished the day closing at its high. That type of close is meaningful because it shows there was no late day profit taking. Buyers stayed in control right into the close, reinforcing the strength we saw earlier in the day.
Shifting to the chart on the right, which is a 60-minute chart of RCAT, there’s another important technical detail worth noting. I’m using a simple moving average that has done a good job supporting many of the recent lows over the past couple of weeks. Specifically, this is a 20-bar moving average of the low. Today, RCAT pulled back and tested this average, and once again it acted as support.
In my opinion, as long as RCAT continues to hold above this moving average, the trend remains intact. When you combine that trend support with the relative strength we saw versus the SPY, it paints a constructive picture. Now the focus shifts to seeing whether this strength can carry over into tomorrow’s session.
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