Here’s how we traded GSX Techedu ($GSX) (November 22, 2019)
GSX EDU GSX
I want t look at GSX ( NYSE: GSX ) today. This is a Chinese online education company; a lot of those Chinese people over there, they seem to like to learn online. They have got a lot of those companies, and this is one of them. Frankly, the price action is better than on New Oriental ( NYSE: EDU ), which has been a crowd favorite over at Stock Market Mentor but this ( NYSE: GSX ) is like the new one, this is the new superstar.
This is how I traded it and people that have followed along with me also traded it. I saw this moving yesterday on really high volume. Frankly, it’s not one of those stocks that I have been tracking it just came up on one of my intraday scans that I use to find unusual things. I looked at this and immediately this is what I thought, okay, an IPO stock, that’s a good thing because IPO stocks, WHEN they work, tend to work really, really well because everybody is a winner.
Here, we’ll say the stock debuted at, we’ll call it 12.50, 12.00, whatever it was here. Once the stock rallied up above this, what I call an enthusiasm high, once it broke out again, then that same level was used as support. So through all of this everybody who owns the stock is a winner. Right here, in July, the stock breaks out here, everybody is a winner, even the lemmings who bought the stock on the opening day because they want to get in on a good thing before everybody else does, don’t ever do that, even those guys are winners.
The stock comes up here, pulls back, support, support, support and then from this point on the stock began trading in kind of a narrowing range almost giving you a volatility squeeze, almost. The stock breaks out, pulls back, now we have a new line of support that is right about here. Back here this isn’t even relevant anymore but once the stock broke out this is the level. Here the stock is trading sideways and we don’t really know whether this is ultimately the level where the stock is going to spring higher from or whether it’s just going to get crushed.
So what happens is, we see the stock breaking out, pulling back, now we can definitely confirm that this is a level of support. So then when the stock breaks out off of this support I am looking at this thinking, okay, typically I wouldn’t like a stock that is so volatile because it can really go either way and this one has. But in this case, I will take it because it’s an IPO. And these IPO stocks are more volatile, they do trade with more volatility and you have to understand this.
So on Thursday I posted in the forum that I am starting a little position here. And then this morning when the stock broke out to a new high, I was just looking at this last high here of 16.85, when it broke out above there I went ahead and built to a full position and now the stock is up here.
So this is the thing, if you are a member and you are trading along then just hang onto it, I’m going to. But if you are looking to buy this stock here’s what I will tell you, I think the stock is going to go much higher but I can’t say that it is going to go much higher from here. If I was a betting man, and I am actually not, it wouldn’t surprise me if the stock juiced again on Monday just because everybody is looking at this. For all I know maybe it’s going to get a positive mention in the financial publications because it is up at a new high. This was the last high here so the stock is up at a brand new high; everybody is in.
First thing on Monday, yippee I am buying the stock, so maybe it moves up here. If you are buying on any further strength you have to understand that that is just a super aggressive trade and you better protect it with a stop. But if you are a little more patient what I would suggest is, just waiting for some type of a pullback, some kind of a test. If the stock tests even 18.00, maybe 17.50 and then it’s showing some kind of support here, that’s really the next kind of safer entry to buy this stock. If you are doing this now you really are just trading a high momentum name and you better be watching it all day long.
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