Do you see these squeezes in SanDisk (SNDK) and Quihoo 360 (QIHU)?
Discussed in this article: Qihoo 360 Technology ( $QIHU )
I want to look at Qihoo ( $QIHU Qihoo 360 Technology Co Ltd ) today. This Chinese Internet Company has been a crowd favorite Stock Market Mentor and Option Market Mentor for a while now, on and off, but the trend has been pretty clear here. This is really what we want to look at, what’s really relevant right now is this uptrend, and then a sideways consolidation, and now a resumption of the uptrend. Its pretty clear-cut; the thing about this is it’s a volatility squeeze and frankly, we could have seen this squeeze take place for another week, or two, or three, not that much longer, before it would finally breakout.
What we just didn’t know is exactly how far this stock would run sideways before the uptrend resumed. But the way you can make this trade on a low risk basis is, you see the stock back here, the high was 45.49, fine, it’s not in a squeeze then. Here, the high is 45.85, so we’ve got these two twin highs here that were occurring; the stock really wasn’t squeezing, look at the Bollinger Bands, not really squeezing, then they start to get a little tight, and then it finally breaks out. So we don’t really have a clear signal of exactly when the stock is going to breakout. But what we did have is some fairly flat highs here, rising lows, and so if you just keep track of what this stock does, when it tests the prior high, use your price alert feature, and every single trading software platform has them, use them, set a price alert, this is going to work for you in this stock.
A similar trade would have been on Sandisk ( $SNDK SanDisk Corporation ) today; this also works. Either of these stocks, I think you’re going to make money if you’re buying them right now. Here on Qihoo ( $QIHU Qihoo 360 Technology Co Ltd ), I would set two price alerts, one on forty-five, if the stock pulls back to forty-five, if I get any kind of firmness there, I don’t think it’s going to pull back to forty-five, by the way, but if it does, if I get any kind of firmness there, then I’m going to want to add to my position. If it gets up to $50.00 and keeps on going I’m probably going to want to add to my position then too, because you look at this chart, this is a really nice rounded bowl here, it’s actually kind of a jagged rounded bowl, but a bowl nonetheless. Higher lows, higher highs, if you buy this stock and zoom out, watch this time frame; my bet is you’re going to have a really nice trade on your hands, and there’s not a darn thing you can do about it except count the money.
I hope that helps. Bottom line is this, when you see these volatility squeezes, note what trend they are in. Are they in a prevailing uptrend or a prevailing downtrend? Here it’s in an uptrend, so this squeeze leads to an expansion, which starts the next leg higher. It’s pretty much a safe bet that this stock is going to go above fifty. What it does after that, well let’s get it through fifty, first.
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