Did you think that yesterday was the top in TopBuild (BLD)? Think again! Here’s how you trade this minx. (March 01, 2017)
BLD NTES BLD
I want to look at TopBuild ( NYSE:BLD ) here, and this is why: We have seen this type of thing before. I covered this the other day, though my apologies, I forget if I talked about it in the Free Chart of the Day here or whether it was ‘behind the curtain’. Yesterday the company reports earnings and it was a gap and crap, a gap and kind of crap. The stock was up 7 percent and then ultimately it actually traded down into the prior days range, it traded down almost 9 percent. So this was a wild ride and it closed right in the middle of the range. If you are trading this stock, and look, if the stock, in two days, goes from 39.00 up to 44.00, that is 14 percent basically in a day and a night. That is one day and then over night opens the next morning up here, you are trading; you are trading around that position. Maybe you are not selling the whole thing, but maybe you are.
You have to be doing something at the open here and it is not buying. It is selling, because that is what everybody else is doing. You could see that right here. The stock opens at 43.73 and it goes up to, I know, 43.73. There were just no more buyers right at the open. So this was a classic sell signal, but here is the thing: The numbers were actually pretty good, they were actually quite good. They provide insulation installation services in the construction industry. By the way, if you look at the homebuilders, a lot of these homebuilders are starting to rock. You can look at KB Home ( NYSE:KBH ) and PulteGroup ( NYSE:PHM ) as two examples. Or just the XHB ( NYSEARCA:XHB ), which is the Homebuilders index. But in any event this is a good sector to be in. It is a good industry to be in. So maybe you are hanging on to this stock, though again, maybe you just sold the whole thing. That is an easy deal to do;15 percent in a day and a half, not bad.
But how do we get back in? Do you just walk away from this? Great earnings and sales revenues over the last year. Sales not really super outstanding, but close enough to where you want to take a look at it. So today the stock is up 5 percent; so it gapped up right at the open as everything else did except the inverse ETFs, and then it traded up to a new high. So your entry on this would have been a breakout above yesterday’s high, again 43.73. On TC2000 software, literally take this 43.70 or so, and restart it when the alert triggers, so just in case you are away from your desk; but the bottom line is, you get hit when the stock clears 43.70. So you could have set that alert at anytime during the day yesterday, because you say, “I want to know when to get back in” (I am not going to do that because I don’t want to get hit with an all the time).
We had a similar thing with NetEase ( NASDAQ:NTES ); it still worked, it has worked just fine. This BS is not bull spit it is buy signals that I keep on our charts as we go. But this is another great example, where different than TopBuild ( NYSE:BLD ) because this was a gap and run as opposed to gap and then a reversal, but he principle is still the same: you wait until the stock breaks out to a new high and that TELLS you that the demand, even at the nosebleed levels, is still really strong. So you wait and that is when you buy the stock on this breakout. Now you are not up by much at all, but at least you are on the right side of the trade. Who knows how far up this will go or if it will move up at all? But that is the principle of this trade. If you look at the weekly chart here you can see, this thing just looks like it is going to Pluto or at least to Mars with Elon.
So if you look at TopBuild ( NYSE:BLD ) on the weekly chart you will see, “Oh, it hasn’t been trading that long.” That is actually a good thing. Every day that this hits a new high, everybody is a winner. So you can see how this is starting to takeoff. What you do here is, if you are long the stock, because this is such a strong breakout, set a stop below today’s intraday low, about 3.5 percent. If you are long this stock now, you see how fast it is accelerating, it is really moving up, you don’t need to set a stop clear back here. “Oh well, if it falls back into the range then I will go ahead and sell.” No, a lot of folks will probably be buying if it falls that low. But you don’t want to be setting a stop this low. You are at 12.5-13 percent only to be selling the stock right back into the demand area. So if you are in the stock now you have got to set a fairly tight stop and follow this all the way up.
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