American Tower (AMT) has been toppled from its uptrend. But I’ve got a trade idea for you. (February 14, 2013)
AMT
I’m Dan Fitzpatrick at StockMarketMentor.com on Thursday, Valentine’s Day. I want to look at American Tower ( $AMT American Tower Corp ). Here’s the Reader’s Digest thing here. This is a busted stock, but in my notes I have, and I quote, “Broken stock finding a floor,” and this is what I’m talking about. At Stock Market Mentor this is one of the stocks that we’ve been following for a long time, it’s been up and down, but mostly up. You can see the trend. By the way, if you’re wondering whether you should be buying or selling a stock or whether you should be holding it; when you see the 200 day and the 50 day moving average moving higher it’s a stock that you want to own. Now here’s the trick. A lot of folks see stocks like this, you know you look back and see that this has been in a nice uptrend for a long time. You didn’t see it here or really here or here, but you saw it on this particular pullback right here. This stock barely bounces and by the way, in fact I mentioned this in a Strategy Session awhile back that you could look at this as a potential shot across the bow; where the stock does something that it typically doesn’t do, and that is trade down below the 50 day moving average. And then you could see it recover a bit and then the question is; is it going to regain a high? Is it going to make a higher high? A lot of times the stock doesn’t do that and then as the stock trickles down traders start looking at this area right back here and say, “Huh, well I guess that pullback actually meant something.” What would happen is, stock comes down and then if it starts to move higher. Traders that had sold say, “Oh my gosh! I sold too soon, I’ve got to get back in,” and they’re buying pushes it up. But what it does not do is negate the initial cause of the decline in the first place. In other words institutional distribution. Well, on this one we didn’t even get that bounce. We got one day were maybe the stock looked like it was going to recapture that 50 day moving average, but it didn’t. So let’s say you bought this dip. That’s really okay, if you did that you still shouldn’t be hurt too much and here’s why. Because with the thesis that I just laid out your stop should be right here at this low, $75.37. If the stock falls below that, I mean if it twitches at $75.36 then that’s your signal that you’re wrong, you’re just simply wrong, this is not a shot across the bow, which by the way is only a trade, it’s not for long term investment. But your thesis that this was a shot across the bow that’s going to give you three or four or five points, that’s just wrong, because if you were right, well the stock wouldn’t hit this prior low. So you should have, again, if you bought here, anywhere in here, hopefully more towards here than up here, but even if you bought here, you shouldn’t be hurt that bad as long as you held your stop, as long as you held to that you’re okay. So that’s a little Trading 101 for you. Know why you’re buying and that will tell you why you should sell. By the way, if you can’t figure out why you know what would have to happen in order for you to sell, then one thing’s for sure, you don’t exactly know why you’re buying. So if you can’t figure out or if you can’t determine upfront what has to happen in order for you to sell, then don’t buy the stock until you can figure that out. So what are we going to do now? Well, I’m looking at this as a potential bounce off the 200 day moving average. So here’s my current thesis; if the stock stays above $72.56, which is today’s intraday low, then I think we’re going to get a bounce. I would look for a test of about $76.00, something like that. I don’t know if it’s going to fail or if this stock’s going to continue higher. I actually suspect it will fail. So what I would be doing is, I’d be buying this stock now, keeping my stop, and I know the 200 day moving average is just a little bit below, but I’m saying that this turnaround day is the turnaround day that I think finds the floor. That means that the low of $72.56 is my line in the sand. I’d take a small position that’s less than a dollar, less than a dollar risk here. If the stock falls below today’s intraday low I’m going to go ahead and take that loss, small, little buck loss, like ninety-six cent loss. Then if the stock, instead, continues down to the 200 and then bounces, well you know what? Maybe I’ll be back in. So my point is this, this is my thesis for this stock. I could say, “Well I think it’s going to bounce off the 200 day moving average.” That’s definitely of viable thesis too, it’s one of two, I’ve given you my other one, which is the support now is $72.56; it is not the 200 day moving average it’s $72.11. Now, you can come up with a third one, which is this; $72.11 is the 200 day moving average, if the stock falls down to $72.05, then that’s when I’m going to sell. Anyway, you’ve got my thesis on that and I hope that helps. Now members get over to the Strategy Session. Also, please check the forum because I was actually pretty actively participating in there and I will be participating more in the days, weeks, months and years to come. I’ve just had some things, mostly personal, that I’ve been working through, but you’re going to see me in the forum a lot more. So thanks for your understanding about that. Okay, have a good evening and happy Valentine’s Day. Don’t forget to get those flowers, avoid the See’s Candies; they’re not really good for you. Free Chart