Learn to spot these tombstones before you get buried. Check out YRC Worldwide (YRCW)
Discussed in this article: YRC Worldwide Inc. ( $YRCW )
I want to look at this trucking stock, YRCW, YRC Worldwide( NASDAQ:YRCW ). Why am I looking at this? I don’t care about any of this stuff; I mean we’ve looked at this on the way up, looked at it on the way down, what I care about is this, I care about this here. Now the stock moved, let’s just do the math from we’ll say down here, this low here. It’s moved up 76, 77 percent in less than a month, that’s a monster move. It doesn’t have to go up and tag the 200-day moving average; it would be nice if it would I guess, right, 16.08. Well what’s really the relevance of the 200-day moving average? It was relevant back here as support, but not particularly relevant here other than just being a line that the stock fell through.
What’s the relevance of the 50-day moving average? Not particularly very much other than the line that was also forming support here, and the stock gapped through down here, never touched here, and that ran up here, right through here. So what I’m saying is the 200 and the 50-day moving averages, both of which I look at a lot, you know why? Because everybody else does and I want to know what the heck everybody else is seeing. They don’t really matter here, what matters to me is the volume, these two big days like big, big volume days. A big move up on Friday, massive move, huge move on massive volume. Opened at near the low of the day, closed near the high of the day.
Okay today, almost as much volume, but not quite. Let’s call these the twin towers; we got a couple of big days here right in a row, big, massive volume with the one big difference. Well, we’ve got a couple big differences, so the stock gaps up, trades high; Oh my gosh you’ve got to get this stock before it gets to $16.00, and then falls down. So unlike on Friday, when the stock got off to a good start and kept going all day long, today the stock got off to an even better start, it gapped up and went all the way up until the time that it didn’t, a little bit like a rocket ship gone bad. So you can see what happened, first thing in the morning 5-minute chart, a gap up and go and after that the stock just really has been petering out.
So what’s the point? The point is you want to recognize this kind of stuff because you’ve got to know when to sell. Look at the volume here on Friday, big massive move, big volume, here big volume here, big massive move. But this looks to me like a capitulation, capitulation of the sidelined bulls, those that thought the stock was going higher but couldn’t bring themselves to buy it, finely they bought. Those that were short, not a big short interest at all, so I don’t really think that matters, that finally covered. The bottom line is everybody that wanted to buy this stock into this uptrend, bought; now suddenly they don’t want to own it anymore.
So here’s how you make this trade, would I short the stock? I’d kind of have a hard time doing that right now, but if I had to go long or short I would actually short, and I would go short with a buy stop right above today’s intraday high. The intraday high was 14.39, again, I’d totally forget about the 200-day moving average. I’d say if this stock goes up to like 14.40 I’m out of here, I mean I’m literally saying like keep a super tight stop on this thing, and I would look for it to move lower. But if you’re still long this stock, you better hope that the guy like me is going to get stopped out, because if it doesn’t happen, if this stock doesn’t move up into this green bar first thing tomorrow morning you’re probably going to see this pullback.
So learn to look for these types of things they’re these exhaustion moves. They don’t happen often, but when they do a lot of times you’ll be able to make some money off of them. But it’s not just the candlestick that matters; it’s the volume that accompanies it as well.