While Pinduoduo ($PDD) looks juicy, I’d wait until the bulls break through some key levels. (November 02, 2020)
PDD
Pinduoduo ( NASDAQ: PDD ); this stock has been consolidating, it’s been in a base for months, for almost 4 months here, and so it’s ready to break out, it’s ready to move higher. Earnings are in a few weeks, 2.5 weeks. So I want to be watching and see what this stock does as earnings approach. I wouldn’t buy this stock now; it’s not doing anything it is just sitting here farting around.
However, if the stock breaks out above here, which is last Thursday’s high of 97.25, if it breaks out above there, that’s a good development, that’s a real nice development. Here, however, is the problem with that; it breaks out above this level then it’s bumping right up against $100.00, which is an even number and it sounds weird but that is when people like to sell. They like to sell even numbers as a stock comes up.
You see the same thing at $50.00 but particularly something like $100.00. And so even if the stock breaks out here you don’t have a lot of headroom before it runs up into the next level of resistance. So it is kind of a hard stock to trade because right now it is at 91.50. So if you are buying it here and it’s working out for you, it’s got 5 percent before the first level of resistance and then a total of 9.5 percent, 9.6 percent before it gets to the next level of resistance.
Meanwhile, on the downside it can come down to the 50-day moving average before you could really expect it to find support and that is almost 9 percent. So it is actually a lot of risk on the downside for not a lot of reward on the upside. That’s why I would suggest waiting for this.
Watch this stock; set an alert like at 97.00 so you can watch it, so you can have it back on your radar. And then set another alert at 99.00 or 99.50. Why there? Because I am not telling you to buy it. I am telling you that you want to watch it. You have to see how it’s trading because timing is everything in this game. And so if the stock does break out and then it runs up to 110.00 and then you see it; well, that’s kind of lame, isn’t it?
You don’t want this stock to dominate your time. You don’t need to sit there and look at the darn thing all day long. Set your alerts and that is very much the same as having a trading assistant. You tell your trading assistant if the stock goes up to such and such, let me know. Other than that, why don’t you go get me some coffee? And then, oh by the way, if the stock comes up to here definitely let me know because I might want to buy it; thanks for the coffee.
That is what you have got a trading assistant for; the only problem is it doesn’t get you coffee if set it on your software, but the assistant doesn’t miss it because it was out smoking a cigarette or taking a bathroom break. I think I have pretty much worn out that analogy.
The point is, if you wait for this stock to trade above 100.00 I think you’ve got a lot more potential for the risk than if you are buying it now or even buying it up here anticipating a break above 100.00; I wouldn’t do that.
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