Here’s how I traded Davita ($DVA), and how I will be trading it next week. (June 05, 2020)
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I want to look at Davita ( NYSE: DVA ) here and this is why: This is showing you what the chart was looking like on March 27th. I was going through my scans and screens and stuff like that and found this stock. And I noticed that the growth rate, the earnings per share growth rate over the last several years is actually pretty small, 3 percent or something like that, it is just not a real fast-growing company at all but it’s steady.
There was a real steadiness in earnings in revenues and in profit margins. Those are the big 3 that I am looking at. And so after the past few quarters they have gradually been increasing. So when I look at the relatively low earnings per share growth rate of the last several years, that’s not a screaming positive for anything, that’s like, well okay it’s growing. But then I look at the fundamentals as far as the quarterly growth rate in these things, in earnings and revenues and profit margins.
Then I see a business, it’s kind of like reliable, it’s like an old pair of shoes that are just always comfortable; let’s say an old pair of jeans because the shoes can wear out. So I started looking at the chart and thought, well all right, this thing is trading like it’s about ready to blast off. At least I don’t see anything troubling in the fundamentals; in fact, I see a lot of good things in there. And so when you see that you have got to go back to the chart.
The chart is actually what brought me to this thing, not where I end up, but I actually started looking at the chart, checked the fundamentals and said, “Okay, that’s fine.” Now I am coming back to the chart and what I saw was this triangle pattern here. And my point to our members was, this is looking like it’s ready to get set up and so I set an alert at 79.10. I just wanted to give people the heads up that this stock was ready to go. This was the day when I said you could buy this thing here.
So a lot of people, including me, got into this stock right around here and then we just have to kind of sit and be patient; because it’s always nice when you buy a stock and it immediately rewards you. And you want to be rewarded; I prefer to be up that day, that means the trade is really going to work out well, but if not that day then at least within 2 and 3 days I really want the market to tell me, yes, you were right to buy this stock.
It doesn’t have to be pounding the table screaming in my ear. I just want the market to be telling me that I was right to exchange my dollars for shares. And so we are sitting here waiting and we don’t really get it. It is just kind of farting around and then not yesterday, this was on Thursday, we get this move here. We added to positions, this, right now is my biggest position, the biggest position I have actually had in quite a while. And then boom, we get this move today.
So you look at this and say; oh wow, that’s a great trade. Well it started with a great entry; it started with a low entry, what Mark Minervini would call a cheat. It starts with a good entry because if you have got a good entry then you have staying power. And so, we are finally getting rewarded by this trade, it traded on twice average volume today, over twice average volume, which is a pretty monster move.
Now, you look on the weekly chart and IF, if not when, but if this thing can get past $90.00 or so, the way I am looking at this is, we’ll call it a $25.00 move down, it is actually closer to 30.00 but we will call it 25.00. If it can break up past 90.00, well, what’s 25.00? Okay, well, you don’t have to do too much math here, 20 points is up at $110.00. So we are looking at $115.00, but we don’t get there all at once. The goal is here to see if this thing breaks $90.00 and if it does, this is just the way stocks trade; they have a really good chance of going to 100.00. After that, we’ll play that one day, one week at a time.
But for now, I think you are a little late in buying Davita ( NYSE: DVA ) here. It is up 7, almost 8 percent in a day but it is popping out of a volatility squeeze and that means that this thing has a lot of explosive power that is just now starting to be released. So we could see this thing really blasting off. The next stop here is $90.00, I want you to watch how that is going on Monday. And then if it is above 90.00 you are chasing but you might be chasing a rocket ship.
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