Looking for a big squeeze? Check out SolarEdge Tech (SEDG). (September 27, 2017)
I want to look a SolarEdge (NASDAQ:SEDG ). This is a stock that I mentioned to our members yesterday, as far as this being in a volatility squeeze. We were on it first thing in the morning when the stock started breaking out above this upper Bollinger Band. This is a stock that should have more upside from here. You look at this, a nice move higher on earnings and then sideways consolidation for almost two months. We still have a way to go before the next earnings report and the stock is starting to move again.
This is actually one of those things when you really look at it; you have got this step on top of this step, on top of this step, on top of this step. We can keep going here, in fact, why don’t we because it is actually kind of fun. Down here and then finally here. So what happens? After each move higher the stock continues to run. We don’t have any of these snap -hooks.
What I would suggest doing here is, it is kind of late to buy the stock. Wouldn’t it have been nice to have bought it earlier, before the 8 percent move today? But I don’t think it is too late to buy the stock. You take a little position here, and by the way, if you are long the stock, we will cut right to the chase, spoiler alert I am going to tell you where to put your stop if you already own it. Just put it right back in here.
Now, if you do that you stand a risk of the stock snapping back, stopping you out, rebounding off the 50-day moving average and then moving higher without you. That is a risk that you take, but at least you have some idea of where you are not going to tolerate the stock to move lower. The challenge is, it is up 8 percent and so to say, “Well, I will buy it here and then I will keep a stop below the 50-day moving average.” That is 15 percent, realistically speaking.
So the question is if you are buying it at 29.25 would you really prefer to still be holding the stock if it pulls back to 25.00? No, I wouldn’t. And the reason is because if the stock pulls back to 25.00 it is because there is no real demand for the stock at 29.00. That is a fakeout. That is a stock that you don’t want to be in. So, therefore, the whole idea of keeping a stop is finding the, what I call, “The oh crap I am wrong level.” You want to have the stop at the point where, if the stock pulled back to that level you wouldn’t really want to own it anyway. Anything higher than that might seem like a little bit of a buying opportunity.
My suggestion is, that you just keep a pretty tight stop on a small position if you are just entering this stock now. This is day one; this is when the smart guys buy. Day two is when the semi-smart guys are going to buy. That takes us to Friday; that is day three; that is when everybody else buys. And then after that day four is not so great. So you want to get in on this and just make sure that you have a fairly tight stop on it so that it does protect you if the stock does pull back, roll over, reverse, you are not hurt on this.
Free Chart