Thinking of buying Bluebird (BLUE) on this pullback? Here’s how you do that. (March 16, 2018)
BLUE
I want to look at Bluebird ( NASDAQ: BLUE ) here and this is why: As members know, we’ve been trading this, we’ve been in it we’ve been out of it. This has been a real money maker for those who were patient and also understood what’s going on. I want to point this out as a potential buying opportunity. This is a very, very low-risk entry.
Here’s the deal: This is really the last smaller immunotherapy biotech company out there. The other two have been taken out by larger companies like Celgene ( NASDAQ: CELG ) for example. So the idea is that Bluebird ( NASDAQ: BLUE ) is probably going to be acquired sometime this year. We don’t know for sure and Lord knows I don’t have any inside information on that. But it is kind of a good guess particularly the way the stock has been trading.
But here’s the deal: For 4 days in a row the stock has fallen. There is nothing wrong with the company it is just that some analysts feel like, “Okay, well the stock is fairly valued.” You are only going to want to buy a stock in a company if you are a money manager where you are buying it below fair value, not at fair value; or certainly above fair value. I think that is the main reason why this stock sold-off; aside from the fact that, for crying out loud it has had a heck of a run here. If you look at the way that this stock has traded over the last year or so, anytime this has been back at the 50-day moving average it hasn’t been that often and when it has it has been right to buy.
I bought a little bit of stock on Friday afternoon. I had mentioned to members on I think it was Thursday and then even on Friday morning, “You know what? I wouldn’t buy it. I would want to wait until a higher close.” In other words, where the closing price on that particular day was higher than the open price. In other words, a green candle as opposed to a red one.
But when I looked at the way the stock was trading pretty much all afternoon 200.00 was a pretty good buy point. So my sense was, “You know what? I’ll take a small position and assume and plan on this support holding at $200.00. It’s a small position; if instead, the stock trades below that level I will hang onto that position. I will never buy more on the way down. I will only buy more if the stock moves back above the 50-day moving average and stays above $200.00. If it falls down to 195.00, 190.00, 185.00, 180.00 I WILL NOT buy more. At some point I’ll sell the stock that I own, small position that it is. I wouldn’t hold it for more than say a 3 percent drawdown at that point.”
I’m going through this with you because I think it’s important for you to see, at least, how I trade a stock like this. It is certainly not for everybody. I’m sure there may be other approaches that might be better; one of them might be, “Feet don’t fail me now. Run for the hills. I’ll wait for the stock to rebuild.” But this has been a good moneymaker for me.
I do understand the story. I look at this price chart and I understand the price chart too and I understand my methodology. And that is, you take a position, fine. NEVER add to a losing position. NEVER, not one time. I don’t care about the buy, buy, buy. I don’t care about this. I don’t care about that. If you loved it at 200.00 you’ve got to really love it at 150.00. Actually, no, I don’t love it at 150.00. So wait for the stock to move higher before you add to a pilot position, which is what I would call this. So I think it’s okay to be buying here just make sure you’re containing your risk.
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