Digital World Acquisition Corp (NASDAQ:DWAC) gapped down 21% to start the trading session Tuesday after a report indicated shareholders rejected a one-year deadline extension that the special purpose acquisition company requested to complete its planned merger with Donald Trump's Trump Media & Technology.
The SPAC requested the extension in order to buy the time required to gain SEC approval for the deal, and if the majority of shareholders vote “no” to the request, Digital World plans to either unilaterally extend the merger deadline by six months or extend the voting deadline.
Not surprisingly, Digital World has had to navigate a number of unknowns, even including provisions to account for how the SPAC would handle possible disruptive events, such as Trump running for office in the future or being charged with a felony.
Digital World’s preparedness for the future may have helped the stock to hold fairly steady throughout the summer, despite Trump using his rhetoric to ignite a number of controversies, especially after the FBI raided his Mar-a-Lago estate last month.
Tuesday’s news has presented an unknown, however, and shareholders appear to be losing patience for the merger to be completed, which is reflected in the stock’s share price.
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The Digital World Chart: Digital World began trading in a downtrend on Aug. 4 after attempting to regain the 50-day simple moving average as support and failing. The most recent lower high within the pattern was formed on Friday at $25.87, and the most recent confirmed lower low was printed at the $22.20 mark the day prior.
- After the market opened on Tuesday, bullish traders came in and bought the dip, which caused the stock to bounce up and completely fill the upper gap, which gives bears more confidence going forward.
- By early Tuesday afternoon, the bears appeared to be winning, holding the stock down over 16% below Friday’s close.
- The long upper wick on Tuesday’s candlestick will cause Digital World to print an inverted hammer candlestick on the daily chart. An inverted hammer candlestick in a downtrend is a neutral indicator, it can sometimes indicate a reversal to the upside is on the horizon but more often indicates lower prices are in the cards.
- Digital World has resistance above at $23.79 and $27.48 and support below at $17.33 and the psychologically important $15 level.
Photo via Shutterstock.
