Five Below (FIVE) was up more than 20% today after a massively strong (June 07, 2018)

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We are looking at Five Below ( NASDAQ: FIVE ) today because it is actually 22 above. What I am talking about is 22 percent above yesterday’s close. The company reported really, really strong earnings after the bell and then this morning, the stock was up huge. Then on Squawk on the Street Cramer was asked about it. He was raving over it and said it was the greatest store around and this and that and the other thing. Me, not having been in one of those stores, I can’t say whether that is true or not; though I have been outside walking in Minnesota in January. So in a way, in a big way, I actually have been five below because that is what the dang temperature was.

Anyway, what are we going to do with this stock? Here is my thing: Let’s look at the retail sector, SPDR S&P Retail ( NYSEARCA: XRT ), this is right up at the top, $49.00-$50.00, really; about 49.00 had been the top. This has run really nicely; from the bottom here up to the top, about 15 percent or so. Here, Market Vectors Retail ( NYSEARCA: RTH ),a similar index only nobody looks at it, is also up. Then we have got stuff like Costco ( NASDAQ: COST ), it is breaking out. But then you have got Urban ( NASDAQ: URBN ), which has also been working really nicely. American Eagle ( NYSE: AEO ), nice. Ollie’s ( NASDAQ: OLLI ), monstrous. After giving good guidance the stock gapped down yesterday and then traded up and so it was barely down on the day at all after the kind of run this has had. And then today it has given some back.

By the way, with Ollie’s ( NASDAQ: OLLI ), look for 70.00. If the stock pulls down to 70.00 then look to start adding a position IF you see the stock start to find support there. If you don’t then just assume that the stock is ultimately going to tag the RISING 50-day moving average and that is when you would look to be buying it because it sure worked well in the past; so that is how you would trade that.

To get back to Five Below ( NASDAQ: FIVE ); it is amazing to me that the stock was up as high as it was and it barely even twitched. The stock opens up here and then within the first 5-minutes of trading it falls less than 1.5 percent. It fell hardly at all from where it opened; this is just not a big decline. So you have got to be sitting there wondering what the heck is going on? I think a lot of folks were shorting this stock into the open. I would have generally shorted it only I am watching it and it didn’t fall.

I was, instead, on NXP Semiconductors ( NASDAQ: NXPI ). I didn’t make any money on that even though the stock ultimately started drifting lower. But I shorted it somewhere around here and then ultimately wound up covering, at what turned out to be, close to the high of the day. Okay, so much for the Wizard of Oz, I am stepping out behind the green curtain. I lost money on this trade. I really thought that I was going to make a bunch of money on it because of the distance that it had it gapped up.

I just didn’t want to go short Five Below ( NASDAQ: FIVE ). I will want to be looking at this tomorrow though, but only at these certain levels. The stock is in this trading range right now. I am just sandwiching it here with a couple trendlines. Just kind of based loosely around the highs and the lows and actually a little bit inside because I want an early warning signal. If this stock starts running up and hits this trendline here at $100.35, the high was essentially $101.00, I am going to have this brought back to my attention when my alert triggers here and then I can watch the stock. Because if it gets up this high it may be the type of stock that is just going to keep going; most notably because there is a high short interest in the stock. If, on the other hand, it falls down and tags this trendline here at 96.21, then I am going to start watching that to see if the stock falls below $95.00.

Now, you might wonder, if these are your levels, $95.00 here and then on the high side 101.00, why not set your alerts there? The reason is that these alerts don’t fire off instantaneously. They fire off pretty quickly, but you know what? Maybe I am going to be in the kitchen getting a cup of coffee or whatever else we do in the morning after the market opens up on the West Coast. I want an early warning signal; I want to have some information so that if either of these triggers are hit I have time to come to this and look and watch it and say, “Okay, I am going to wait and get a better entry, I want to time my entry.” That is one of the biggest benefits of alerts, you can set them, obviously, anywhere you want. But to set them right at a key trading level or a key inflection point I think is a huge mistake because you will wind up chasing things. You will wind up shorting something AFTER it definitively breaks down below support or buying something after it DECISIVELY breaks out above resistance.

So instead you set these things a little bit closer together and then you know you are going to get an early warning signal one way or another on this. That is what I would be looking to do. And either of these trades, well certainly something to the long side, if this breaks out above $101.00 this would only be a day trade for me. There is no way that I would be long a stock that was up 22 percent today and then is up even more tomorrow. I would never hold a stock like that over the weekend.

Now, if it is a short and the stock falls below this level of 95.25 that is something that I would be more inclined to hold. Simply because if the stock falls below today’s intraday low that means that everybody, and there are almost 10 million shares bought today, everybody who bought is a loser. So if the stock starts falling below this level, anytime this thing starts rallying, you are going to get a lot of traders coming in to sell this stock. So we want to wait to see how this stock trades. If it falls out of bed you want to pound on that thing and short the snot out of that thing to the short side. If it rallies, fine, you can buy the stock but I would just say make darn sure it is for a very short-term trade. Because again, you don’t want to be long a stock that is up this much going into a weekend or frankly even going into the afternoon on a Friday. I just think that would be suicide.

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