Is it too late to grab this slippery stock? Check out WD-40 (WDFC) (May 18, 2018)
WDFC DSGX ANGO FCB WDFC
I want to look at WD-40 ( NASDAQ: WDFC ). I have got about 9 cans of this in my garage. The reason is because I needed a whole bunch and my garage is so messy that every time I need it I forget whether I have it or not and I can’t find it and so I go buy more. That has been going on for years and I suspect that this is part of the reason why this stock is up as much as it is. It is basically up at an all-time high.
So why am I looking at this? First of all, this chart here looks really, really solid. Now it would have been nice; the initial entry on any kind of breakout buy here on WD-40 ( NASDAQ: WDFC ) would have been about $120.00, and it would have been a few months ago. That is the way this stock trades. If you really look at this, the earnings per share, they’re steady, they are steady; they will not knock your socks off. They are just real steady growth, 10 percent or so over the last several years, annual earnings per share growth. The revenue is kind of okay basically it is flat.
So what I am telling you is, this company, from a dynamic standpoint is not, it is just not really dynamic. But from a trading standpoint this is actually pretty interesting now. You are going to look at the weekly chart and see this thing is in kind of a solid uptrend. Now we zoom in, we look at the daily chart. The stock had been trending sideways for about 2 ½ months, almost 3 months. Then it broke out today, right? Well, it actually broke out yesterday, it actually broke out on Thursday.
Here’s the deal: This is in a, you can call it, a high-base squeeze, whatever. It was up near an all-time high here and the stock was squeezing. This is what we like to see, I actually have a scan that I have developed to find these things. One of the parameters is, it has got to be within 10 percent of its 52-week high. Not necessarily the all-time high but just within 10 percent of its 52-week high.
The reason is because by definition if a stock is within 10-percent of it’s 52-week high then you know it is not under distribution it is under institutional accumulation. Otherwise, it wouldn’t be close to it’s yearly high, it just wouldn’t. So right off the bat we are getting stocks, irrespective of what the chart looks like, we are getting stocks of companies that are under accumulation. Now, they might be right on the cusp and about to drive down to zero but at least we have our parameters set so that we have got a pretty good list to start from.
And then after that we look at things like, which way is the 50-day moving average trending? And how well is it trending? Is it running around like this, where really then the stock isn’t really in a trend? It is swinging so wildly that there is really no kind of a break out possibility. It just might be a trading stock, it might not be; but it just doesn’t really matter, so we are looking at that.
And then I also look at Bollinger Bands; though you don’t need Bollinger Bands you can just use your eyes. You can use Keltner Channels, however you want to do it. I am looking for tight volatility for a stock that has been trading in a sideways trading range for a while. This came up on my scan the other day and then yesterday, this would be on Thursday, my alert popped when it $135.00. Now we are up another couple dollars, “woulda coulda shoulda”, right?
I don’t think it is too late to buy the stock that is why I am going through all of this for you. From a trading perspective, yes, it is up basically four days in a row, it has run up about 4 percent so it is not like it is super extended like some tech stock. It is up 4 percent from where the 50-day moving average was. But if you look at the weekly chart, if you are looking to buy this stock and just hang on to it, you can still do it. You can take, maybe, a small position here. Again, this is not for a trade, this is for this chart.
So you can take a small position now because it may continue to move and so it is nice to get a lower cost basis in the stock so that you have got a little bit of a profit. It may move higher but if it pulls back then you can add to your position. So you are taking a small initial position because you are a day or two late but you want the stock. So you take a small initial position, if it moves up, great, you bought some, you’re happy. If it rolls over, if it pulls back closer to the 50-day moving average, which would be a really good buy point, about $5.00 lower than it is now, then that is where you take a bigger position.
Or, you could just pass on the first part of the trade; “Dan I don’t want to be buying a stock that has gone up 4 days in a row.” All right, I get it, I support you in that. But I also think that after 4 days in a row, 3 of which were on heavier than average volume, this is a stock that remains under accumulation, Now, look at the volume, this is 62 thousand shares; this is a total stealthy stock. It is a very stealthy stock; the market cap is less than 2 billion so it is not a huge company. There is room for more institutional buying is what I am saying. You could just say, “Alright, I get it, I see the condition, I made my decision. I want to buy it but it is not the right time to take action, I will wait. I will wait for the maybe the stock to get down to 133.00 or so.” So “I will buy the pullback. Look at the weekly chart.” So that is how you would trade WD-40 ( NASDAQ: WDFC ). Or you go out in my garage and find a can.
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