Hearing the music? Don’t be so quick to start a band. Here’s my take on $BAND (September 25, 2020)
BAND
We still have about an hour and a half in the market but I want to take a look at Bandwidth ( NASDAQ: BAND ) here. This is a stock, it’s been a monster stock, since it broke out in May it has doubled; I would be happy with that but I am concerned about what is happening now.
The stock was running up here, the trend was a little volatile but it was pretty solid support right at the 50-day moving average. Then it dipped down here and it wasn’t high volume. There wasn’t really a lot of volume on this sell-off, slightly higher than average but it was okay. The stock held at the 50 and that’s fine, that’s dispositive. We like to see stocks hold at the 50 even if the uptrends are mature.
What has me concerned, we’ll say, about this is, right now I am seeing this kind of price action and I am seeing the volume like this. And more notably, that during this part of the move higher I am seeing this kind of volume. We’ve got the price moving higher and we’ve got volume declining. Well, that’s not what you want to see when a stock is climbing up the right side of a “base”.
That’s what you have to look at this as, as a base. You don’t want to see a stock rising on lower volume; you want to see it rising on higher volume. It declined on low volume, built this little base here on relatively low volume, and then finally got a big move higher here. THIS was a good indication, and by the way, don’t forget about this because this has to be institutional buying. This a good sign for the stock and this has not been negated by the way. Don’t get the wrong idea, it hasn’t been negated, this is a really good development for the stock, it shows you there’s buying here.
What I am concerned about is, you get this big move higher here, a sell-off on heavier volume than we saw back here. I could make this a 50-day moving average and then it would definitely look like it had higher volume. Let’s just do this, see what I mean? Now I have kind of smoothed out this stuff and now this is certainly heavier than average volume on this decline. So this is a rejection of the breakout above here and then a pullback there and now we are up to here.
The way I am looking at this right now, this is just a little bit more than 1 percent below this last high here. So this would be my question to you; if you are bullish on this stock do you really get much of an advantage in buying it before it proves itself and before it breaks out above this level? You get a 1 percent head start, that’s not enough for me. So I would demand that this stock break out above this level and break out on volume before I even considered buying it.
I think this is a very risky stock right now; not that it may completely reverse, in my view, it is just a really, really difficult entry, I haven’t seen too many stocks, where if you bought them in a chart like this, that you wind up making a lot of money. You may make a little bit of money but most of the time the stock pulls back and then the question is, am I going to take a small loss because I realize I’m wrong? Or am I going to be saying, no, crap I’m in going to be stubborn with this stock and just hang onto it?
What I would do is, I wouldn’t buy Bandwidth ( NASDAQ: BAND ) right now. But I would absolutely watch it, hope that it pulls back to a better entry, closer to the 50. But along with that it just has to drift sideways for a while. There is just too much volatility in this stock; it’s up 25 percent in a matter of a week’s worth of trading. That’s just nuts; so just be careful about this but definitely be vigilant as well.
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