With Bitauto (BITA), timing is everything. (September 12, 2014)
We’re looking at Bitauto ( NYSE:BITA ) here. On Friday the stock was up essentially two percent, this was the strongest stock in the IBD 50. It was kind of a tough day in the market, not that tough, markets go up markets go down. If you’re a “Barron’s” reader you make money both ways, right? Sure. Anyway, this was the strongest stock in the IBD 50 and that means something, it means that there’s demand out there, even when stocks are generally under distribution, so that’s a positive thing for Bitauto ( NYSE:BITA ); I think you want to own this stock. Now, the question is, do you want to buy it right now?
Here’s what I’m seeing, you see this volume spike here? That’s a distribution day, big wide ranging day, relative to the way the stock typically trades, all selling activity, aggressive selling right here. Since that time a little consolidation, but volume has been on the decline, that’s what you’d expect after this kind of big move, you’re going to get some stabilization. But, is this really a level that you want to buy? One thing I mention in the Weekend Update,” I go in to a little more detail is, you don’t just look at price levels this way, you look at time levels, time spans this way. Bitauto ( NYSE:BITA ) is right in the middle of the range and say the high of the 50-day moving average, it could trade all over the place here.
Look at the weekly chart and you’ll see what I’m talking about. This stock has been on a terror, and now on the weekly chart you see this little hook, this Bollinger Band hook on the opposite side of the move; I’m giving you pearls here, when you see this kind of a hook, again, they have to be really, really wide, really, really wide, when you see this kind of a hook, that typically gives you an early heads-up that the stock is not going to keep moving up. That’s not to say it’s going to have a big reversal, but just that the upside momentum is likely taking a pause, so it’s either going to do this, or trade basically somewhere below here.
Now, where might we get a good indication of that? I know, back here. So get this Bollinger Band hook, similar to this one, extend this up so it first started there. You can say, “Yes, but that undercuts your point Dan, because if I had bought this stock here, now I’m up here, I’m making good money, so forget you and your little Bollinger Band hooky thing.” Well, wrong Horshack because what’s happened? After this little hook here, look at the box, all this time goes by and you can still be buying Bitauto ( NYSE:BITA ) below where the hook started.
Now ultimately it goes higher, absolutely right, but if I’m going to get to enjoy a move from this level up to here, I want to start as far into this box as I can, because it could be that there are times around here where other stocks are providing me a good opportunity; but once I’m in then I don’t have that cash, I’ve exchanged that cash for stock. So I want to be waiting as long as possible to buy.
What I’m saying is, from this level here, you’re probably going to be able to buy this stock for under $85.00 plenty of times over the next month or so, perhaps more but I’m not going to go out that far, I’d be guessing; I’m guessing now frankly, but I’m guessing base on the historical trading pattern that this stock, as well as about all stocks that I’ve looked at conform to. And that is, when you get a hook of this proportion you typically get an end or at least a big pause in the upside momentum of the stock. Just be careful of Bitauto ( NYSE:BITA ), that’s all I’m mentioning. I think you do want to own it, but maybe you want to look at it towards the end of October, it’s probably not going to be higher than it is now. By the way, if it breaks thorough $100.00 or so, then everything I’ve said, throw it out the window and buy the thing.
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