Drink in this chart of Lemonade. $LMND – March 4, 2025
This is Scott at Scott Trades on Twitter with StockMarketMentor.com and your Chart of the Day. I want you to drink in this chart of Lemonade ( NYSE: LMND ).
Let’s tell the story of this chart. What we have from Lemonade ( NYSE: LMND ) is an IPO move right off the bat. A bullish engulfing candlestick, everyone FOMOs into this new trade, and ultimately buyers run out of gas and the stock sells off. Then the stock rebounds and ends up topping in and around the same time that the market topped.
Of course, the Federal Reserve started raising interest rates at the fastest pace in human history. The stock was pretty much untradable for multiple years until it started developing this base. If you are an IPO trader you would assume that this base is what they call the institutional due diligence phase of a stock. Essentially, what that means is, it’s institutions doing their due diligence, figuring out if a stock is good or not good.
You can see that this stock has positive earnings. Within that period we see the stock living in and around this 200-day moving average. At some point, the 200-day moving average, the black line, ends up acting as support. We can see buyers stepping in every time this gets under that 200-day moving average. The buyers step in again and again.
That’s a really great signal that you want to see on a stock. Because, again, that’s showing institutions who have done their due diligence throughout this choppy bottoming phase are stepping in. They like the stock, they like the story, they like the earnings, and any dip down and around that 200-day moving average ends up being bought.
Finally, in 2024 we get a trend change here on Lemonade ( NYSE: LMND ) on earnings. We see the stock break up, break out, and do it on way heavier than average volume. It’s some of the heaviest volume that this stock had traded in within a year. The stock then follows the market higher and then gets tired in and around November, which, let’s be honest, we were all tired by the middle of November.
Then we saw the stock retest that 200-day moving average once again. And what happened? Once again the institutions stepped in and stick-saved this stock. So clearly the 200-day moving average on Lemonade ( NYSE: LMND ) is an institutional support zone. That’s definitely an area that you want to be aware of just in case the stock ultimately breaks down under the 200-day moving average.
You know they’ve come in to save this stock time and time again around this level. When they stop coming in to save it, that’s probably when it’s time to step aside. But at least right now, we have Lemonade ( NYSE: LMND ) in and around a cluster of moving averages. We have the 50-day, the 21-day, and the 8-day exponential, all kind of bunch together. And today we had an upside reversal and a pretty bullish engulfing candlestick, coming on okay volume.
Now, the stock is still just consolidating, this is a volatile chart with big ups and big downs. I would love to see the stock continue to go sideways for a little bit here and just build that base of consolidation in and around these moving averages, the cluster moving averages I pointed out earlier. If that doesn’t happen, a way to get into this stock could be a breakout of this clear downward-sloping trendline coming on volume.
So I would have a breakout alert on Lemonade ( NYSE: LMND ), and I would look for a move and a close above that level coming on volume. So you want to see the stock do this and you want to see it close above that level. The reason you want to see the close above that level is because time and time again we see sellers step in, and you can tell that by these wicks of the candles.
We don’t want a fake out here, we don’t want the stock to come up here but then close down here. So you definitely want to watch for a move above, and a close above that $38.00, $39.00 level coming on volume for Lemonade ( NYSE: LMND ) to signal a potential trend change, and maybe a test of some of these previous highs like up here at 44.00, up here at 48.00, and maybe even over here at 54.00.
That’s what I would do here on Lemonade ( NYSE: LMND ). Watch for that breakout, it could come tomorrow, it may take a couple of weeks to grind around these moving averages. But I think if it can do that, we have clear long-term support in and around the 200-day moving average, and we have some swing targets up here in the low $50.00 range for you to take profits on.
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