Shares of Nebius Group N.V. (NASDAQ:NBIS) are trading lower Wednesday. They may be on the verge of filling a gap to the downside.
This action would make a classic ‘floating island' pattern appear on the chart below. This has bearish implications and would suggest a new downtrend is forming. This is why it is our Stock of the Day.
When buyers or sellers are aggressive, they can move stocks. They can even make a stock open at a price different from the one at which it closed.
Because there is no trading between the opening and closing prices, a blank space can appear on a chart. Traders refer to these as ‘gaps.'
This aggressive buying and selling tends to occur twice. The first is at the beginning of a trend, and the second is at the end of a trend.
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The ‘smart money' is aggressive at the beginning of a trend. These traders don't mind moving the price. They expect the trend is just beginning, creating what traders call ‘breakaway gaps' on a chart.
The ‘dumb money' gets aggressive at the end of a trend. These are people who have been watching and waiting for a better price. They become frustrated and finally decide to get aggressive.
Their buying or selling could cause what is known as an ‘exhaustion gap' to form on the charts.
The floating island pattern shows an exhaustion gap, a consolidation, and then a breakaway gap. As you can see on the chart, this could end up being the case with Nebius.
Frustrated buyers aggressively entered the market at the end of an uptrend and made the stock gap up by about $10. Now it appears that this gap may be about to be refilled to the downside.
If this happens, it would form a classic floating island pattern. This would indicate the beginning of a new downtrend.
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