There is plenty to learn from Stride ($LRN) – February 7, 2025
Dan Fitzpatrick here at StockMarketMentor.com. I want to look at Stride ( NYSE: LRN ) here today.
This stock has really been on a tear. It’s done really, really, well for us, I’ll show you where our buy was in a second. But the thing that I want to point out is the power of the squeeze. What I’m talking about is this, this right here where you’ve got basically lower highs and higher lows. This is converging right on the 50-day moving average.
The distance between the upper and lower Bollinger Band here is 4.5 percent, maybe. Then you see a nice move higher, on this day it doesn’t look like much. It’s much of the same stuff here. The volume was pretty good, but the thing that’s so powerful about this is, it’s close to the 50-day moving average.
If you think about it in a different way, right here the 50-day moving average is 103.61. So that tells you that over the last 50 days, the average price is $103.61. That’s really, really close to where the stock is right now. So what’s the simpleton’s takeaway on that? The stock is fairly valued. The stock right now is basically right where you would expect it to be.
If you’re looking at, well gosh, what’s the average price over the last 50 days? Well, here it is right here, so the stock’s pretty close. Why is that important? It’s important because institutions, and momentum traders, will be happy to buy an uptrending stock when it’s close to the 50-day moving average.
Again, it’s like it’s a fair value, but when you get the stock that’s up a lot higher than the 50-day moving average, like here. Here this thing’s up about 25 percent above the 50-day moving average. Well, a momentum trader isn’t really going to buy it that high, it’s not a good entry point. It’s expensive relative to the average price over the last 50 days.
Now, that’s not to say it won’t still go up, it is going up, and it continues to go up. What I’m saying is, that when a stock is up like this. It’s not like you look at this and lick your chops and go, wow, I want to buy this stock. It’s just not an ideal entry, any of these are not ideal entries. Even though, ultimately, you would be making money at least up until here when then, the stock starts drifting sideways.
This is a type of chart that you’re going to see all the time, you’ll see a lot of these, I see them every day. Then moving forward, the stock ultimately runs, and where’s it running? It’s running right along this little thin line here, which is the upper Bollinger Band. It’s supposed to contain all the price action, and it basically is.
If you look here, we’re on January 29th, now trailing along this purple, magenta, whatever it is. It’s the 8-day exponential moving average and it’s not really even coming back to test it. Then finally, here we are today, and the stock is trading again, at above-average volume. So this is not giving you an opportunity to do anything.
If you’re long it’s certainly not giving you a reason to sell. But if you are looking to buy, well guess what? It’s up 25 percent above the 50-day moving average. Back here the stock is up 25 percent above the 50-day moving average. If we just look at it like this, 25 percent, right? The very high here is 25 percent. So this is not at a place where you want to buy.
Frankly, it could almost be a place where you could look for a bit of pullback or at least starting a drift sideways. But so far just looking at only the price action without the 50-day moving average the stock is performing really, really nicely, and volume is starting to tick up.
Now, I’ll show you what we did here, I’ve had this on my Active Trade List. We bought this on the 8th of January. We bought this when the stock broke out, I was watching this, and I had my alert set based on what this candle was doing. The high here was 108.94, we’ll call it 109.00. I got my alert, and by the time I got to it, I bought it at 109.02.
This is where we bought the stock here, and note the volume, heavier than average volume. We get in on this stock, it’s got a squeeze going, and then it’s just ride it on to victory. The toughest thing to do on a trade like this, I’m going to leave you with this, the toughest thing to do on a trade like this is to hold it.
You look back on some of the best stocks ever, and maybe you held it for part of the move. Maybe you were in and out a few different times. But in hindsight, you look and go, well, I should have just bought the stinking thing, and then gone on vacation, I’d made a lot more money. With a stock like this, I’ll put it in that category, it can be tough to hold this stock when it’s just going up, and going up, and going up, and you’re afraid that you’re going to miss the opportunity to sell, where, right at the top, you don’t get to do that.
So my suggestion to you is if you happen to be long this stock, congratulations, good for you. I would be setting staggered stops, don’t just be all in or all out. Divide your position into thirds, maybe even quarters, or something. Then as you take profits, like on the first down day. Or oh, if it breaks below the 8-day exponential period moving average, take some off the table, something like that.
What you’re doing is, when you’re taking those partial profits you’re reducing your average cost basis of the remaining shares down to a lower price. If you’re looking at it that way, your profits are actually increasing.
Free Chart