Ellie Mae (ELLI) — still working…but keep her on a tight leash. (November 01, 2016)
ELLI SP-500
I want to look at Ellie Mae ( NYSE:ELLI ) here. This stock has been in a volatility squeeze. A nice uptrend, in a volatility squeeze, then things got pretty dicey here. We have earnings, a big move to a new high and then now we are back here. Here is the thing: Ellie Mae ( NYSE:ELLI ) is in a nice move higher, up and up and up. This would be the way I would look to trade this right now: My assumption would be that the stock is going to move higher, it is just a timing thing, it is going to move higher. My assumption is that, because the stock has been up here and now it is up there. Generally speaking, if we draw a line right in between, it is upward. There are a lot of different ways we can draw trendlines. One way would be this way, I explained how to do that last week in the first part of the workshop. We do it this way, we are extending the trendline up a bit. For the most part this thing held, it is at a new high.
So this is the trade, it is actually pretty clear. You stay long the stock until or unless this trendline is broken, then you get out, because it has really been established as a trendline there. So you would keep a trailing stop, lets just say below this trendline. As the stock moves up your stop moves right up along with the trendline. At some point you are going to get stopped out, that is the way trendlines are, ultimately they break down, otherwise they would be lines to infinity. The the other thing you do is, you look to buy on a move ABOVE last Friday’s high. So you are long the stock now and you continue to be long, as long as the stock stays above here, and then you add to your position when the stock hits a new high. Then you are in kind of prime position to take advantage of a trend. Don’t give this stock too much room though. And the reason I am saying that is, because this market is kind of a market under pressure and I don’t want to give anything too much room when I have an S&P that is looking like that, and this is a head and shoulder pattern.
Free Chart