According to analysts casino game maker WMS is on pace for yet another quarter of 30% minimum year over year EPS growth. They’ve pulled this off for 5 quarters in a row, and the 2 before that featured growth in the high 20’s.
Price has formed a constructive double bottom base. Today it has passed a key resistance point at $32.56 on above average volume.
Although it is common wisdom to buy a double bottom on a high volume break of the W, it is very difficult to buy and hold a break out in this manner because double bottoms by their very nature do not form the kind of lengthy and tight bottoms we saw on NFLX that are durable enough to sustain an uninterrupted advance. This often leads to volatility around the mid point of the W.
O’Neil suggests a better buy point is roughly 3 points above the low of the first leg of the pattern provided price passes this point on volume. For WMS that would be $32.60, which conveniently dove tails with a resistance level on the chart. I didn’t mention this setup previously because yesterday’s break was low volume and failed and the advance today was initially on lighter volume. But volume has streamed into the stock as the break out became obvious and in an uncertain market price is holding up.
I wouldn’t buy this here, but would look for potential entry at a point closer to the $32.60 level, perhaps on early weakness tomorrow. In a market that renews its uptrend, this stock is a prime candidate to achieve fresh 52 week highs.
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With today's gain WMS has now gained 20% in 12 sessions since breaking out from a double bottom base. Our entry was earlier and our gain is nearly 30%.
ReplyDeleteAccording to O'Neil's rules the rapid nature of this gain calls for an automatic 8 week hold of the stock from the break out point of the pattern on 7/23.