Did you hear about Fitbit (FIT) and Jawbone? Here’s your trade. (April 29, 2016)
In this free video I want to look at Fitbit ( NYSE:FIT ). This company reports earnings on Wednesday and you can see how the stock has been moving out of this volatility squeeze. It’s a little bit like Twitter ( NYSE:TWTR ) was at one point, and also GoPro ( NASDAQ:GPRO ). The stock was in this squeeze and it brokeout, and it has continued to move. Not in a huge way, but it’s enough to get my attention. The stock is still like 50 percent below its 200-day moving average. That’s a big distance below. And what I mean by that is, there’s plenty of headroom for this. But it’s always risky to hold a stock over earnings. They were just able to get the last of Jawbone’s patents invalidated, which is a good thing for Fitbit ( NYSE:FIT ). My bet is that when they report earnings they’re probably going to kind of adjust their guidance, or at least speak to that, and talk about now being able to have a better distribution, or whatever it is that they’re going to say.
The point is, this is a stock that has broken out from resistance here, continues to move higher. I think you want to have at least a couple more days in it if you’re trading this. But I would also suggest looking at it this way: I can’t really see the stock falling back to $12.00, that was a really nasty move. High volume sell-off. Capitulation, really, in my view. And so now the stock is moving up, the 50-day moving average is up, it’s got plenty of headroom. I like Fitbit’s ( NYSE:FIT ) products, frankly, I didn’t when they first came out, but I do now, I’m looking at my surge as I say this. But if you like this company, it’s expensive, no question about it, but if you like the company then take some off the table before earnings. But keep some stock, and then if the stock falls BACK even down here then buy some more once the stock shows some support. Frankly, this company is not going out of business. The further the stock falls the more opportunity you will have to increase your position. But, and this is a really important but, it’s a big but, BUT only do that once you see support holding.
Case in point, Apple ( NASDAQ:AAPL ). You can see what happened here, but lets say you wanted to build a bigger position in Apple ( NASDAQ:AAPL ). Maybe you were holding this and you were hoping Icahn was wrong (although he didn’t tell us until after earnings), but you’re holding Apple ( NASDAQ:AAPL ) and you’re looking to buy more stock. “Well shoot! I’m buying it this day. Because I see support holding here at 96.00, I’m in.” So you buy some more stock, right? Well then the very next day that support doesn’t hold. So what held true for yesterday, the very next day, is false. So you’ve bought here anticipating some support that’s going to hold, then you sell that when the support does not hold. Because you know what happened? You just got in a little bit too early. And for all you know, the weekly chart is going to continue, as I think it will, and lead the stock lower.
But the point is, you wait for support. You wait for a sign of support and you trade off of that sign. And then if the stock violates that sign, if it breaks below it, then you’re out. And so I’m just suggesting that’s what you can do with Fitbit ( NYSE:FIT ) if you want to own the stock. Have some, because they might give great guidance and the stock will be up another 10 percent. But also be willing and ready to add to that position, and it would be a longer-term position, if the stock falls. Anyway, I hope that helps you here on Fitbit ( NYSE:FIT ). I know I’ll be watching it, and trading it, and holding it, and looking at my surge right now.
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