We’re taking a half position in this stock into the close as it crosses back over its 50 MA on a surge in volume. We’ll require a close above the 50 MA ($62.07) to justify holding the position.
Why the renewed interest in this stock? We previously profiled it and entered a long position expecting big things but were disappointed. The last earnings report met a mixed market reaction and the company’s offering of new shares threw the stock into a correction.
A stock with this kind of volatility is not a good hold, no matter its prior accomplishments.
But GMCR has now put in a six week consolidation in what is a developing second stage base on base and this afternoon’s performance could indicate that it is prepared to resume its uptrend.
GMCR’s consolidation has so far been constructive. What most strikes us is that the two weeks of high volume in the base consist of one week where price closed virtually unchanged and another where price ended in the upper half of its weekly range, both signs of support. Trading along the bottom of the base tightened up over the last two plus weeks. And this afternoon price is mounting a move on expanding volume back over its 50 MA.
We are taking a half position because we view this as only an early action point. We want to see price build the right side of the base on volume and hold those gains. If it does that over the next week or longer only then we will be interested in adding to our position.
Posts
Lying with Statistics: the September Jobs Report
12 years ago
Trade Update
ReplyDeleteOur purpose in taking a half position in GMCR late last Friday afternoon was to gain entry in the stock as it lifted off a well formed “bottom.”
Three sessions later it’s appropriate to evaluate its performance.
With the market rising and GMCR moving off a supportive pattern it should be no surprise that price has climbed about 6% from our suggested entry.
But volume has been a bit disappointing, only about average.
After two strong days of gains yesterday the stock stalled on very light volume, not necessarily a negative as it looks to consolidate its gains. That action is continuing today. Although price has tried to move higher volume has remained extremely light indicating the stock does not yet have the wherewithal to move to fresh highs.
How do we proceed from here? With GMCR’s gain coming on such pedestrian volume we find ourselves unable to muster much appetite for enduring a pullback. We’d move our stop to $64.
Should price successfully consolidate its gains and move higher we’d look to take profits on any move over $68 if it is accompanied by continued nondescript volume.
We’d continue to hold the position should price move higher on volume. At that point we’d look to add to the position on a break out of the pattern.
Re-entry Setup
ReplyDeleteWe've detailed the reasons why we took a handsome, quick profit in GMCR.
But this remains a leading stock and, volume aside, continues to act bullishly. As with NTES we'd reenter under the right circumstances.
We would consider purchasing a half lot on a break out of the current pattern, on a move over the closing high of the base at $69.90.
We would like to see volume come into the stock on that move. If it does we'd add on a further move over the $72 highs.