How are you trading Ambarella (AMBA)? You might be in the right stock, but are you in the right timeframe? (May 19, 2015)
Here’s a weekly chart of Ambaella ( NASDAQ:AMBA ); I want you to take a look at something here. I wouldn’t want to trade this stock, but I wouldn’t really want to not own it either. Upwards, really, really long consolidation. Upwards, not that long of consolidation but ultimately the stock’s moving higher again. I’m looking at this and I see it almost kind of as a midpoint in the price action in this uptrend; and the stock just continues to move higher.
My suggestion is that you own this stock, you don’t trade it; you look at the stock and you can see look, the growth rate, 31 percent, the P/E 41. I like to see the growth rate higher, this is an average by the way; I like to see the growth rate higher than the P/E, but when you’ve got a growth rate of 30 percent and you’ve got a pretty decent record of that, if you look at here the earnings have been growing this quarter on quarter 19 percent, 42 percent, 84 percent, 162 percent.
So you’ve got massive earnings growth, and then you’ve got on the revenue or the sales side, 21 percent, 25 percent, 43 percent, 62 percent growth. These are pretty monster numbers and so you have to realize you’ve got to pay up for growth. The fact that they’ve got an established growth rate up here, a P/E that’s a little bit higher, this is not nosebleed, this is not nosebleed P/E at all, this is just a little bit rich; right? So then we look at the weekly chart and you can see this is not a rich stock, this is a stock that you just need to be buying on any kind of weakness.
I got some Ambaella ( NASDAQ:AMBA ) on this breakout; I think I might have even talked about it in the “Chart of the Day”, I know I published a little piece over on “Real Money” on it. But what I’m telling you is this is a volatility squeeze, an expansion happened on high volume; this is a stock that wants to go higher. It’s a little bit extended from the 200-day moving average, a member asked me about that in the forum, relative to Skyworks ( NASDAQ:SWKS ) and I talked about that in tonight’s “Strategy Session”, they look the same for the most part.
But what you want to be doing is looking at this: after a sideways consolidation you look at what the value of what the stock is, at least in your mind, based on growth. Is there a strong record for growth? There is here. This is a stock that you can be buying. Now, lets look at the other side of the trade, because there’s always another side of the trade. We really need to see this stock continuing to bounce above the 50-day moving average. As long as it’s doing that then it’s all good in the hood. But if this starts to do that, you don’t want to be long this stock.
So stay long and strong as long as this uptrend continues, you buy this stock, you immediately zoom out and just ride this thing higher.
Free Chart