How high can Nuskin (NUS) go?
Discussed in this article: Nu Skin Enterprises Inc. Cl A ( $NUS )
I want to look at Nu Skin ( NYSE:NUS ) here. You can see this stock just absolutely blew up, I mean in a good way, after earnings, and I want to just look at a simple flag pattern to show how we get a measured move.
First of all we look here and the stock was in a squeeze. We love these squeezes because when the price actually breaks out it tends to go farther and faster than you’d normally think. That’s exactly what happened; so we get this move here, you could look at that as a flagpole, and then a little pennant, lower highs, higher lows on declining volume. This is a consolidation that you like to see.
Then we want to wait for the breakout. After the stock moves up and then halts, which it did here, on the second day it pulled back, this is new resistance, it’s the top of the flagpole. So the pennant or flag is flying there, it’s the top of the flagpole, that’s the end to the move right? Until the stock breaks out above the top of the flagpole or I should say, until and unless, because it doesn’t always happen. Just because you see a pennant or flag doesn’t entitle you to make money, it just means that you’ve seen a pennant or a flag. This is actually actionable when the stock breaks out and moves up to a new high. When it does that then the theory, for a technical analyst, is that the flag flies at half-mast.
So where’s half-mast? We’re using this to give us some kind of a price target. So this is what we do, $65.00 is about where the stock broke out, and I’m using just down and dirty stuff here, $65.00 is where the stock broke out, about $80.00 is where the stock peaked out here, on the initial move, on the initial flagpole. So that’s $15.00, 65.00 to 80.00. So we take that same $15.00, once the stock breaks out, we take the same $15.00 and project it upwards, that gives us a minimum price target of $95.00 on this stock.
Now, you’re not entitled to see Nu Skin ( NYSE:NUS ) move in the same amount of time that it did from 65.00 up to 80.00. But as a technical analyst or a technician, if you’re looking at this, this is your minimum price target, this is your assessment of how much potential reward am I going to get, and at how much risk? Well, you would put your stop just a little bit below this latest low, lets call its $76.00, something like that, so you’re risking basically $6.00 to make quite a bit more than that.
Also, one last thing on these flags; really, if this is a break out, if its a valid breakout, the price really should not be moving back even to the middle. It should really stay above this line or close to it. If it pulls back a little bit that’s fine, but then it really needs to go up right away. I think this is a bullish move here, it seems extended, it is extended, but as long as you keep a protective stop here, you can still trade this stock to the upside.