LGI Homes (LGIH) has broken out of the pattern we spotted a week or so ago. Here’s the plan now. (December 01, 2015)
Lets look at LGI Homes ( NASDAQ:LGIH ). I started covering this stock not too very long ago when it was in this consolidation pattern. It was trading really well, staying above the 50-day moving average. I’m showing you this pattern because it’s repeatable. There’s a reason why I was looking at this stock like this. Because higher lows, lower highs, within an uptrend; meaning it starts here, now it’s up here. That’s known as an uptrend. This is a consolidation pattern. Boom! You look for that kind of move. You look for a breakout above here.
Well, that’s what we got here, this was last Wednesday. We got that here, we got a breakout above these last highs, volume was pretty good. This, you don’t get a big move every day and thank the good Lord the that because then it gives us an opportunity to get in. And then finally we get this kind of move on massive volume. So what do you do now? I’ll tell you what you do. Lets say you’re long this stock at 33.00. You can go ahead and sell it at 35.50 if you want. But why? The stock’s in an uptrend. It hasn’t actually been trading that long. It’s got really solid fundamentals, and this last move here, from August on, look at the volume.
Okay, this type of characteristic, fairly low volume for a while, and then you can ABSOLUTELY see an increase in volume at the same time as you see this. That can mean one of two things, and you’ve got to be open to both of them here, okay? Ambarella ( NASDAQ:AMBA ) had kind of a similar deal here where no volume here, then suddenly, and by the way, this looks like it wasn’t much of an increase in volume, but check this out, suddenly you take that MASSIVE volume over; you take that out of the picture and suddenly you can see a real big change in volume here. So when you see this massive move in volume at the same time as the stock’s trending higher, Hey! That could be a sign that the “end is nigh.”
On the other hand it could be just a sign that things are just kind of getting going as you can see here on Palo Alto Networks ( NYSE:PANW ). Fairly low volume, but then you get this kind of move. What happened? Volume starts picking up here. Sure you get this pullback, nothing moves straight up, other then Bernie Madoff’s portfolio. That guy was great! So right about the time that the volume starts to tick up, you can see it here in the 40-week moving average, how it’s up higher than it was back here. The stock just kept moving. And it kept moving on higher volume to where you can look at this now, at almost $200.00, and say, “Man, I wonder why I wasn’t paying more attention to the volume? I wonder why I wasn’t paying more attention to it back here?”
So what I’m telling you is, look at LGI Homes ( NASDAQ:LGIH ). Trade it like an investment not like a trade. Use this volume as an indication that there’s increased interest, increased activity in the stock. That increased interest and activity is going to make the stock DO something, and it’s going to make it do something important. Two things, it’s either going to move up a lot or down a lot. It’s not going to move sideways, not when there’s an increased level of activity. Stocks just don’t do that. They move sideways when there’s LITTLE activity in the stocks. When there’s not that much going on, they just kind of tick around here. But when there’s an increase in activity they move and they move BIG. HERE, this is moving to the upside.
So what do you want to do? I’ll tell you what you want to do. If this stock is to pullback at some point, and you haven’t been participating, then you take advantage of this pullback. If you own some of the stock, if you have just a little position, Hey! Hang on to that too, and then load up more when the stock gives you a buying opportunity. The bottom line is this, this is a huge sign of strength here on this stock. It’s not a blow-off top, it’s coming out of a consolidation that’s gone on a couple months. So I want you to keep track of LGIH ( NASDAQ:LGIH ). I want you to keep track of these symmetrical patterns. And my bet is, you’re going to wind up making some money.
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