Here’s Day 3 of this trade idea on Hess ($HES) (September 17, 2019)
HES
Because I went over Hess ( NYSE: HES ) yesterday and described a trade I am going to come back to it today and this is why: If you remember, and if you don’t just go to the website the video is there; if you remember yesterday I said that unlike a lot of stocks like Hess ( NYSE: HES ) broke out and had a pretty big move in a day, over 10 percent.
These types of moves can be kind of suspect if you are buying them. A 10 percent move is pretty dicey and so this was the scenario I laid out. I said, “If the stock actually gaps up it would be kind of more of a breakaway gap.” Although I could say, “Yesterday’s gap was the breakaway from this consolidation below 66.00.” If it gapped up again that would be a real strong reason to buy this stock. You can see how volume was twice average volume so there is a lot of oomph behind this.
Then I said, “A lot of times what happens is, a stock will gap down a little bit, kind of like retrace part of the move, and then that’s when you know whether there is real demand for the stock. Because if the stock gaps down and then doesn’t recover then you realize that there are a lot more people selling this move than I thought there would be so I am going to go ahead and either not buy the stock or if you bought some yesterday go ahead and sell it.
The idea is that if you get a stock that opens down here a little bit and then it trades down rather than up like that, then that’s a sign that you don’t want to be in the stock. So again, a gap down is fine to buy if it moves up but if it does not move up then you don’t want to be buying it, okay? So then what did we get today? We got a big move down. A gap down, not a huge lower open but then a big nasty sell-off way down here and then the stock recovered.
So what’s going on? Well, I will tell you what’s going on; I would stand by my same analysis going forward. If I didn’t have a trade I wouldn’t be covering this again. I would say,”Well forget about it.” But I think there is a chance here and this is why: Look at the volume. Today’s volume was above average, it was heavier than average and yet the stock closed well off the lows. If we look at the 5-minute chart you can see that first thing in the morning was when we got the big dump and then buyers came in at 65.00.
You can look at this and say, “Alright, 65.00 is the new support for this stock. If this stock falls back below 65.00,” and that’s less than 5 percent room, “if this stock falls back below 65.00 then I don’t want to be in this stock.” So it rallied up and then essentially traded kind of sideways for the rest of the day.
I wouldn’t buy this stock here. But what I would do is, I would set an alert, yet again, at $71.00. If the stock breaks out above $71.00 and I have seen this type of thing happen a lot; if the stock breaks out above $71.00 then this pullback today was just a shakeout and you are likely to see the stock go a lot higher. So that is what I would do, set an alert at $71.00, until or unless that alert is hit totally ignore this stock, it doesn’t even matter. But if it breaks out above 71.00 you could see a real nice percent gain in this trade.
Free Chart