Renren (RENN) popped by more than 20% today. But after that kind of move, is it time to sell? ..
Discussed in this article: Renren ( $RENN )
I want to go back to Renren ( NYSE:RENN ); I featured this as a potential buy yesterday, it’s nice when the stock goes up 22 percent right after I feature it as a potential buy because it makes me look a really, really smart. But the bottom line is Baidu ( NASDAQ:BIDU ) is taking some of the business off its hand, so they’re paying them a boatload of money and sadly that’s why the stock went up as opposed to me being bullish on it.
But here’s what I wanted to show you, when you’re looking at stuff like this, whether it’s a stock or a chart that I’m looking at, or anybody else; by the way you make money on the movement of a stock, you don’t make money on the fundamentals of the company. Nobody ever made a dime, including Warren Buffett, by strong fundamentals in a publicly traded company; you don’t make a dime on that, not even a dividend because companies with crappy fundamentals pay dividends too. You make money on the price movement, some buyers will buy because of strong fundamentals, but you make money on the price movement, always remember that.
Here’s what I wanted to show you, let’s say you’re looking at this stock and you think, “Wow! That Dan Fitzpatrick’s right.” I think the stock closed yesterday at 3.90 so you say, “I want to buy this stock.” Okay, so first thing in the morning, we’ll just go with the 5-minute chart, I don’t have after hours here, this is where the stock closed yesterday, ticking up a little bit. So let’s say you’re looking at this, all right first thing in the morning when you see the stock starting the fire off, you go back, you should have this already etched in your brain, you go back and see this was a stock on a breakout. You see that and say, “Wow! It’s breaking out.” So you look at this, you set your stop here, and you set a tight stop and let this stock run; here’s what’s interesting, the stock blew through $4.00 and didn’t trade below that, this is kind of interesting to me anyway, this is $4.00, the stock actually blew through $4.00 pretty quick and then was trading on top of it.
So this is confirmation that when the stock is falling or retracing to an even figure like $4.00, if it bounces off of that level, then you say, “Okay, well that’s where demand is.” If it falls away from that level you say, “Okay, well that’s where supply is.” So here we know that there’s strong demand for this stock, so what you should be doing is holding this thing, just hold it all the way through. Now what are you going to do? The stocks up so much at the end of the day today, you’re going to do the “Hey! Let’s do that again trade.” The stock closed at 4.78, which is almost the high of the day, so you look and see how the stock acts, if it starts trading higher still you do not go back to the daily chart, because you know what that looks like already; you stay zoomed in and you stick with this stock as long as it keeps printing these nice little green outlined candles with white in the middle, which means the close is higher than the open, which means it’s all good.
So this is a type a trade that you want to be making, ideally you want to be making it yesterday and I am NOT pounding the table saying this is going to go up again. What I’m saying is, patterns tend to repeat themselves all the way up until the magical moment when they don’t. This I would look at and go, “There’s no way I’m going to buy it at 4.78, wish I had bought it at 3.78.” But if the stock continues to work its way higher on that 5-minute chart, coming out of a volatility squeeze like it did yesterday, like it did the day before, if that’s the way it’s going to start trading, I would take that thing for a ride; just use the 5-minute, even the 1-minute chart for your trading decision.