Bioptix Inc. jumped on the Blockchain bandwagon in a big way in October, changing its corporate identity to Riot Blockchain, Inc. (RIOT) while shifting focus out of animal healthcare and enhanced surface plasmon resonance technology into strategic investment and operation in blockchain technologies. Skeptics might find fault with the sudden transition, but the transformation has lifted the stock in a momentum-fueled uptrend from a summer low at $3.45 to two-year high at $24. Meanwhile, trading volume has escalated from a somnambulant 5,000 to 20,000 shares per day to an astronomical 10.1 million.

The company just announced that it will spin off majority-owned TessPay Inc. in a merger with Cresval Capital Corporation that is expected to close in the second quarter of 2018, while the resulting entity will trade on Toronto's TSX Venture Exchange. Riot Blockchain share owners will receive 41 million shares of the new entity as a result of their 52% TessPay ownership. An American stock offering for the deal was not discussed but is a likely management goal. This transaction should keep the stock in play for months while traders keep a wary eye on this sector's massive day-to-day volatility. (See also: What Is Blockchain and Why Should I Care?)

 

Fibonacci retracement analysis offers a reliable method to organize price structure in rapidly moving financial instruments because it reflects crowd sentiment at various stages within active uptrends and downtrends. More importantly, this math-based approach sidesteps many algorithmic shakeout games, zeroing in on price levels that remain hidden to the emotional crowd. As a result, applying this analysis to Riot Blockchain position-taking could offer a sizable trading edge over the competition.

Dramatic price action has carved a completed Elliot five-wave advance off the deep summer low, supporting a Fibonacci grid stretched from end to end. The first and second impulse waves reversed at the .382 and .618 retracement levels, while the Dec. 11 gap cut through the 50% retracement. The vertical third impulse wave demands a separate grid due to the broad extension and should also be examined on a 60-minute chart to highlight hidden support and resistance levels in lower time frames.

A steep two-day decline has dropped the stock into new support at the .618 retracement level, but it's possible that selling pressure will eventually cut through $20 and fill or partially fill the big gap. The .786 retracement level of the third impulse wave (fifth Elliott wave) has aligned with the middle of the gap, indicating that downside into the $16.50 to $17.00 price zone will mark a potential dip buying opportunity. Meanwhile, alarm bells will sound if the stock drops to $12 and completes a 100% retracement because that may indicate the uptrend has come to an end. (To learn more, see: Strategies for Trading Fibonacci Retracements.)

 

A Fibonacci grid stretched across the third impulse wave on a 60-minute chart reveals trading opportunities in shorter-term holding periods. The stock has just filled the Dec. 12 gap, which also confirms an exhaustion gap that completes the five-wave price structure. Given this signal, it is best to avoid new long entries until the stock a) trades back above the gap terminus at $26 or b) drops to a lower level that offers more favorable reward:risk.

In turn, that highlights round number support at $20, which has aligned with the .618 retracement level. Reward potential is sufficient at that level, requiring that dip buying profits be taken at or below the gap's inception point near $23.50. A more potent buying opportunity will arrive if the decline completes the downside journey into the .786 retracement level, filling or partially filing the Dec. 11 gap. An upturn near that price zone could signal the start of a larger-scale buying impulse that eventually reaches the prior high and sets off another trend advance. (See also: Riot Stock Rallies as Blockchain Tech Goes Mainstream.)

The Bottom Line

Fibonacci grids stretched across Riot Blockchain's momentum-fueled uptrend organize highly volatile price action, exposing hidden support levels that offer high reward with relatively low risk. (For additional reading, check out: Bitcoin-Related Stocks Soar After Futures Debut.)

<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>

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