Here’s your trade on Keurig Green Mountain (GMCR). (February 07, 2015)
I want to look at Green Mountain ( NASDAQ:GMCR ) here. Lets just do the quick analysis. This is a stock that is basically, or not basically, broken down. Now, the difference between this big sell- off here and then a quick rebound is, because saw what this did here. Here, the stock had been kind of drifting lower, which, think about it from a trading standpoint, from a lets see what everybody’s cards are, standpoint.
This stock had been drifting sideways for a while. Plenty of traders who bought the stock say around here, in this box, by the way, back here, big sell-off, that doesn’t mean people weren’t buying. There are a lot of folks that were long the stock from here, because for every share sold somebody had to buy it.
So what I’m saying is, there’s a lot of resistance, near-term resistance; this is a daily chart and this is the first of the year right here, so just since the first of the year literally everybody except those folks that bought on Thursday and Friday, everybody’s a loser this year. Now you go back in to 2014, after the top, everybody’s a loser that bought, we can keep going back; you get my point.
There’s basically a lot of pain in this chart; lets just draw this over, somebody that bought back here is profitable, great, that was last summer. What I’m saying is, there is a lot of resistance, a lot of supply at this level. This is just a function of dynamics, the reason that the stock rebounded on Thursday was simply because it was like a capitulation sell-off right at the open.
Bad earnings, the stock gaps way down, like get me out of here, that’s just the way traders trade for whatever reason. Plus, anyone who was short this stock in anticipation of lousy earnings, they are absolutely going to cover those shorts, right there. You’re short the stock, Green Mountain ( NASDAQ:GMCR ) goes lower, you think they’re earnings are going to be bad. The stock goes down here and you’re not going to cover, you’re going to say, “Well, I think it goes even lower.” Not going to happen.
So part of the reason why the stock is rebounding here, other than again just the dynamics of folks that were long are selling the stock, is that folks that are short are buying the stock. So one outweighs the other, aggressive buyers. So what are you going to do now? If you own this stock for the long-term you’re kind of in trouble. If you own this stock for the short-term you’ve got to look at these levels here, right about there. You’ve got to look at that level as pretty big supply, I would even be going down here and looking at this.
Here’s the deal, the stocks almost spanned the gap, it’s almost completely closed the gap, so you want to be either selling out right, right in to here, which I would be doing. If you got it down here go ahead and take your profits up here. Don’t expect this kind of bounce, it could happen but you made your money, you made some money, sell half. If you don’t want to sell the whole thing then put a tight stop on the other half. My analysis is just simple, you’ve potential supply up here that’s going to be absolutely overwhelming any additional demand after this kind of move.
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