When things can’t get much worse…it just might be time to buy the stock. Here’s my take on American Outdoor Brands Corp (AOBC). (March 01, 2018)
AOBC
Let’s look at American Outdoor Brands ( NASDAQ: AOBC ). They reported earnings, right? After the bell guess where the stock is? It is clear down here (9.41). This is a company that among other things sells firearms. They own Smith & Wesson and Ruger or Sturm Ruger as it is called. The CEO reports that they are expecting lower sales and revenue, decreasing firearm demand, things like that so the stock gapped down.
Here is what I think: I think this could be a buying opportunity for a trade. Here’s why: First of all the stock has been declining. You can see at one point it was at $23.00, it closed at 9.00, 9.50. So this has been anticipating this kind of stuff. All of the big spikes here are red, all of them. These big massive volume spikes are red; this is institutional selling so there have been a lot of selling days all the way down. Now we are down to this level here where it is below $8.00. To me, I look at this as a potential selling climax.
By the way, if you look at just the last couple of big volume spikes here, what has happened on the day after? Well, we got the big sell-off there, it took a day or two but then we get a move higher. So we get the big sell-off here, right here, over the next couple days we get a move higher. It wasn’t a big deal but what I am saying is from a risk standpoint buying here we can expect a ton of volume. Buying here where the stock opens up and then seeing the stock move higher, that is a pretty likely scenario.
So let’s just frame this trade for you. You can see the big move here; I would just require the stock to be ABOVE where it was when it opened up, wherever it opens up. If it opens at 8.00, 7.50 you look at the stock, wait for it to settle out. That might take 30-seconds it might take 5-minutes. But once the stock starts trading ABOVE the opening print that is when you buy this stock and my bet is you are going to get a nice little trade out of it.
By the way, one thing that I think people might not be taking into account and that is actually the positive impact that negative news about gun usage has on sales. This is why: Because there are a lot of people that weren’t really thinking about owning firearms and others that already own firearms and they are good. When there are these news articles and all this stuff on the TV, the idiot boxes as my dad used to call it, all this stuff on TV about this big movement to basically take all your guns, etcetera, etcetera. That prompts a lot of people to say, “Well, I want to get a firearm before I am not able to anymore.” So it actually spurs demand.
That is what I can see happening. You are not going to see it tomorrow but just think about that. What I am saying is, this stock is not a stock that is going to go down to zero. I think that this could actually be a selling climax tomorrow. And by the way, one other thing, to be clear, I am not advocating gun ownership. I am not advocating not owning guns. I am advocating buying a stock that has been factoring in a big nasty move for quite a while on this big pullback; under the theory that when the question is, “Gosh, could things get any worse?” The answer is, “Well I am not really sure. Actually, this may be as bad as it gets.” That is actually a time to be buying this stock; at least for a trade.
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