Anatomy of a trade on HealthEquity (HQY) (February 23, 2018)
HQY
We are going to look at HealthEquity ( NASDAQ: HQY ) here. This was a crowd favorite in the Fitzpatrick household for a while here. The chart was kind of sloppy but the fundamentals were good; the chart was actually very sloppy. The stock was breaking out above 55.00. And so my sense was I will own this stock, recognize the choppiness of it but I will stay long the stock. We continue to get higher closes, all these white candlesticks, which is what we love, and then finally we get this.
I got stopped out of this. I wished I had my stop higher but I didn’t; I certainly didn’t expect this. The stock starts falling and falling and falling. I am looking for news on it and I couldn’t find it; some insider sold a bunch of shares. The news came out on this day, it reported on an insider sale from a week or two ago, or something. That didn’t make sense to me. Then after this deal is done then the next day I see an article that says actually the reason is that some researcher had said that they think that the health savings account enrollment growth, which is what this company is all about, is going to be slowing. And so, of course, that drops the multiple down, the market cap, everybody is unhappy and that is that.
So I get stopped out of the stock. Again, not as high as I wish I had. In hindsight, I would have set my stop right there but it didn’t. I get stopped out of the stock, didn’t make much money on it at all; not what I thought I was going to. Then today comes, I am doing this on Friday, the stock actually gaps down. I am seeing the 50-day moving average and I am waiting and I am watching this. Am I going to buy it? You can see the 50-day moving average is right around 49ish, between 49.00 and 50.00. I am looking at this in the morning, gaps down right to the 50-day and kept going so I promptly forgot about the stock. I bought a little here and I am watching it; then I wound up selling it. This is an ugly trade for me; then I wind up selling it. Frankly, the only reason that I am buying it in the first place is, I will admit it, it is a stupid reason to be trading a stock, I was kind of ticked on the way it was on Thursday so I thought I would get back at it.
Finally, when the stock breaks out here, for good, that is when I thought, “Okay, I get what is happening here, a big blowout here.” Now finally the pukefest is over; we see the big massive volume, big huge volume first thing this morning. And then after that everything settles down. After this kind of move lower buyers are starting to control the stock and now it is moving back up. I am still in this stock and frankly if it pops up to 54.00 or 55.00 that is when I will sell.
But here is another take on this: Look at the weekly chart, this is a stock that really hasn’t been trending for a while. It is up close to an all-time high here. It hit that this week but generally speaking the stock is printing these higher lows. As I look at this, this is a stock that really should just kind of be held if you are doing this at all. Or you could say, “There is nothing about this chart Dan, that I like. I don’t even know why you are covering it.” That would be okay too but there are a lot of different ways that stocks trade. What I try to do is expose you, in these videos, to a bunch of trading opportunities and a bunch of different ways to look at stocks so you can incorporate those into your own game; it is not “Trade Along With Dan.” But if we look at this stock we can see that this has been trading sideways, seems like forever.
So here is what we do from now on: When the stock gets back up to here like I said, if it gets back to 55.00 or 56.00 I am going to sell that thing. If it turns out that it just keeps rocketing higher, well you know what? I missed that trade and I’m okay with that because I got back at the stock; now I don’t care about it again, I just care about my money. But if the stock moves up here I am selling it. I am going to keep it on my watchlist and then the next time it comes back to 50.00, you know what I am going to do? That’s right, I am going to buy it. And I am going to do that again, and again, and again like I am shampooing dirty hair, lather, rinse, repeat. Lather, rinse, repeat; we just keep doing it. That is how I am trading HealthEquity ( NASDAQ: HQY ). Give it a couple more bucks and then I will be out of it, thank you very much and then we will go again at $50.00.
Free Chart