Digital World Acquisition Corp (NASDAQ:DWAC) and Phunware, Inc (NASDAQ:PHUN) both skyrocketed into popularity in late October 2021 when it was announced Digital World, a SPAC, would merge with Trump Media and Technology Group.
Phunware, which had partnered with Trump during his 2020 reelection campaign soared higher both due to its connection to Trump and because Bitcoin, which Phunware acquires, was running toward its Nov. 10 all-time high of $69,000 at that time.
Like with many retail-induced squeezes, both stocks declined almost as quickly as they mooned but held on to some of their gains. Digital World, which was trading near $10 prior to the merger announcement, shot up to reach an all-time high of $175 on Oct. 22 before falling to the $65 level on Oct. 27. Phunware, which was trading near $1 on Oct. 20, reached a high of $24.04 on Oct. 22 before declining over 81% to the $4.20 mark by Oct. 26.
The stocks then entered into a long period of consolidation but on Jan. 12, Digital World broke up from a key resistance zone and began to trek higher. The ascent toward the resistance zone began on Jan. 6, the day before Trump Media and Technology Group announced its plans to launch its new social media app on Feb. 21.
See Also: NY AG Claims To Uncover More Evidence Of Fraud By Trump And Family: What You Need To Know
Digital World looks as though it could be headed toward a new all-time high if the current trajectory continues and the launch of the app is successful. Phunware has a lot of work to do to bust through heavy resistance at the $4.13 level and for now at least, no new catalysts to propel it there.
It should be noted, however, that events affecting the general markets, negative or positive reactions to earnings prints and news headlines about a stock can quickly invalidate patterns and break outs. As the saying goes, "the trend is your friend until it isn't" and any trader in a position should have a clear stop set in place and manage their risk versus reward.
Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.
The Digital World Chart: On Wednesday, Digital World gapped up slightly higher but immediately ran into a group of sellers and profit takers and by mid-day the stock was trading down about 6%.
- The decline is needed to cool Digital World’s relative strength index (RSI), which was in oversold territory on Tuesday measuring in at about 74%.
- Digital World also ran into and rejected the 0.382 Fibonacci level (Fib), which may indicate it's time for the stock to print its next higher low. Shares will need to continue printing higher lows if it continues in its uptrend, which will help the stock to develop support zones above the $66 level.
- The stock has resistance above at the 0.382 Fib and the 0.5 level, which equates to about $106 and support below at $73.15 and $66.31.
The Phunware Chart: Phunware shot up over 12% on Tuesday but ran into and rejected the 50-day simple moving average on the daily chart, which indicates longer-term sentiment remains bearish.
- On Wednesday, Phunware was in the process of printing an inside bar pattern, which leans bullish because the stock was trading higher prior. Traders can watch for a break of the pattern on Thursday to gauge future direction.
- Phunware has a gap below between $1.92 and $2.41 and because gaps on charts fill about 90% of the time, it's likely the stock will fall down to fill that empty trading range in the future.
- There is resistance above at $3.13 and $3.38 and support below at $2.86 and $2.62.
