Here’s your trade on Vertex ($VERX) – January 17, 2025
Dan Fitzpatrick here at StockMarketMentor.com. I want to look at Vertex ( NASDAQ: https://optionmarketmentor.com/stockanalysis.html?ticker=verx ) today.
This is a stock that we’ve been on for a while. I’ve had this on my On Deck List, which is this list right here. What I do, and this is on my Stockwatch tool, what it is is, I’ll go through and find stocks that I look at, that when I see a certain pattern, I’m going, Okay, if this is a baseball game, this is a stock that’s on deck.
In other words, it’s not at the batter’s box yet, to where it can hit the ball and get on base, but it’s really, really close. Then I’ll look at the chart, and then I will typically set an alert like, what would be a good time to be buying this stock?
Typically, what I’ll do on something like this is, let’s say I drew this trendline, I’m not going to do it now because I’ve already done it, I would set an alert for this trendline, click that okay, and then I will get an alert when the stock crosses that trendline. Well, I already got that alert, so maybe I’ll do this one now.
I want to see when this stock hits a new high, actually, I’ll do it this way to be precise. The high of the day here on this day is 57.74. So this will be 57.74. Then I put an alert here, you can do this on your trading software, they all allow for alerts and boom. Now, I don’t even have to look at this stock because I don’t want to buy it here, it’s too close to this level, and I don’t care.
What I’m anticipating is, that the stock is going to come up here, and then it’s going to falter, it’s going to pause. Why? Because this is where the weak hands live. The stock hit up here, and then everybody that bought after that, down to here, lost money. So we get this one move higher here on this day, a big massive up day, that’s institutions coming in saying, I’ll take all you’ve got, and then this pushes the stock back up.
We’re getting some, I want my money back, selling here from the folks up here. What we’re looking for is, this is like the line of demarcation, it’s right there where you’d expect selling to take place. Whether or not it does, that’s for another time. The fact remains that this is the way technicians work.
You look at these things, prior resistance should continue to be resistance up until the time that it’s not. If this stock runs above this level here, then we can look at this as a continuation of the move. And by the way, I look at this setup as a really, really nice volatility squeeze, where these Bollinger Bands are really, really pretty tight together.
This was the tightest that they were just the day before the breakout they’re at 4.66 percent. Typically, I look for volatility squeezes where the Bollinger Bands are say, within 6 percent of each other. This was a really, really tight squeeze, and the red lines here, I slapped some third standard deviation Bollinger Bands on them.
It’s literally a trading felony for a stock to be above the upper third standard deviation, or below the lower third standard deviation. It just doesn’t happen, it’s like it’s breaking the law. So when it does and it keeps going, that is a strong stock. I look at this stock now as being a really strong stock, and do you know what? I want to buy it, but I just can’t do it yet.
I can’t do it right now, I feel like I missed the trade. I look at the weekly chart and I’ve seen this pattern before, haven’t you? Where you get a clean breakout here, the stock runs up, it pulls back like a little flag pattern here. And then at some point, they don’t all do this only the best ones, at some point, the stock breaks out and continues another move, as it did here, and did here too, this is what stocks do.
We see this move higher all the way along, and now we’re seeing it again. Wouldn’t you expect $60.00, because I do, I just can’t buy it today. But maybe on Tuesday, if I see this continuing to move, maybe I can buy it, I’m just not going to tell you on Friday because I have no idea what’s going to happen over the next 3 days.
Maybe the stock is running up here a little bit more and I say, all right, I’m pretty aggressive. The low of the day here on Friday is 55.92, so maybe I’ll set a stop at 55.90, really tight. And then I’ll buy the stock, if or when it breaks out above 56.68, that’s today’s intraday high. If I do that, this is a really, really tight stop, I don’t know if you’d make money on this or not.
If I’m doing that, I’m betting not very much money at all. At 56.68 I’m buying this right at the top of the range, and I’m selling it right if this range gets surpassed on the downside, so it’s like 1.5 percent, I’m buying this stock. What are my chances of getting stopped out? Candidly, pretty good because you see this kind of volatility in these stocks.
You can frame a trade this way, and look at this and say, wow, it’s between the second and the third standard deviation, wow, that’s pretty cool. And we’ve got this starting on the 13th, this is a week ago, Monday, right? Here’s a low, here’s a high, on subsequent days, higher low, higher high. Higher low, higher high, higher low, higher high, higher low, higher high.
We continue to see this stock moving up, so if I want to be really aggressive this is the type of trade that I would make. Or maybe I just buy a little bit, a little position. And then if the stock breaks out above here, I buy more. But what I really do is it all starts like, I see the squeeze fine, but I’m not done. Now I look at the weekly chart and this is what I see, and now I start to get excited.
Are you getting my drift here? You’ve got to be looking at two-time frames here. But ultimately, this trade, to me, started here. I’m watching the stock here, and bam, that’s where the actual trade starts.
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