I’m bullish on this buffalo. Here’s your trade on Blue Buffalo Pet Foods (BUFF) (May 12, 2016)
I want to look at Blue Buffalo ( NASDAQ:BUFF ) here. They make pet food, right? All the stuff my dogs like. As we look at this chart we see, I want to say a cup and handle, but the more I think about it I can’t even hardly say that, because it’s only been trading this long. It started trading the middle of last year, this is the high right here. So we draw this across and the stock is still a few bucks below that. I think a better way to look at this stock is actually a lot more simple. Here’s the base, the stock got what I call an enthusiasm high right here, this peak, and then it traded down, based for quite a while. Now some of these stocks, these new issues, they come down here and it looks like they’re forming a base and then they keep going down (GoPro comes to mind, and a few others). So this is not that.
This was a breakout, and then now the company reports strong earnings. And the stock is essentially, it’s kind of a breakaway gap I guess you could say, or we’ll call it a continuation gap if the was the initial breakaway gap. But either way the stock is now trading above $26.00. You can buy this stock now. It will be a little volatile, a little choppy, but I’ll just say that the 50-day moving average should hold. I think for the time being you don’t really have to keep a stop clear down here. That’s a pretty loose stop, and think about it, if you’re buying a stock now and then it ultimately falls down and back, are you still going to be hanging on to it hoping that it bounces here? That’s not the kind of trader you want to be.
If you’re buying a breakout, you’re buying the breakout because you theorize, you believe, that the stock is going to continue to move. It’s up on a fairly weak day, in a fairly weak environment and that’s a strong move. So if you’re wrong you don’t want to hold this back. You may get shaken out or something, but if the stock falls, I’d say, below 25.00, then that’s a good place to put your stop. I’ll give you specifics, 24.90, if the stock falls back that far then maybe you just want to wait, bide your time, wait for it to test the 50-day moving average and then go after it again. But ultimately, look, I own two Labs, they’re really hungry, trust me, pet products are going to have plenty of customers just at my place.
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