15 cents down on an ugly day on Wall Street is a victory — still loco for LOCO? (October 07, 2014)
Just a quick recheck here of El Pollo LoCo ( NASDAQ:LOCO ). I mentioned in yesterdays Chart of the Day that this stock was actually looking really, really good, it continues to by the way, but looking really good. It’s been in a volatility squeeze for a while and my suggestion was, if I recall correctly, that you wanted to watch the upper Bollinger Band and when the stock cleared that level it would give you a pretty good buy signal.
It did clear that level, 38.17, it just hasn’t been there except back there when it has a few times. But the thing is this, 38.17, I look at this and I think this stock is still poised to move higher, What I would do now though, because we did get a push, and then ultimately a failure at 38.78; that’s the high here, this is the one that I would trigger. If you’re long the stock I think you just go ahead and stay long the stock. But in such a horrible market environment, I mean 29 of 30 of the Dow stocks were down, that’s just the way the market’s rolling over a little bit now.
So the fact that El Pollo LoCo ( NASDAQ:LOCO ) was down just 15 cents actually says a lot for the underlying support or demand for this stock. I would look at today’s high of 38.78, that’s an area at which you would add to your position. It’s trading around now, you’ve got some that’s great. If the stock eclipses today’s intraday high then you know there’s some buyers that are coming for this stock, you can be one of them. As the stock starts to move higher you’re already long and then you just go ahead and continue to add to your position as the stock moves up, because you’ve already got profits in your position.
I just like that better than buying a stock on the way down. Why do I like that better? Hey, who doesn’t like Caterpillar ( NYSE:CAT )? Love Caterpillar ( NYSE:CAT ). Think about how you would have been crushed if you were buying this stock on the way down. Similarly Cummins ( NYSE:CMI ) engine, who doesn’t like a good engine? Cummins ( NYSE:CMI ) engine, you’re buying that on the way down, you’re hurting; I can go on and on; buying them on the way down, not a good strategy, it doesn’t work, it just simply doesn’t work.
If instead you wait and get into a stock that you can buy as it moves up, then what are you doing? You’re putting more money down on a winner. It’s kind of like being able to bet, win or lose, on any football game after the game already got started. It’s like third quarter one team’s up by a lot, you can go in and place you’re bet on that team; wouldn’t it be nice if you could do that?
In my view that’s what you’re doing when you’re buying a stock that’s moving higher. On the other hand when you’re buying a stock that’s moving lower you’re going in, you’re putting your money on the losing team and you’re saying, “I think this team’s going to come back.” Well, maybe it will but usually they don’t because they’re behind for a reason. Similarly when stocks are going down they’re going down for a reason too, aren’t they? So use this strategy on El Pollo LoCo ( NASDAQ:LOCO ), I think it’s going to work for you.
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