The “personal defense” stocks are under attack. Check out Smith & Wesson (SWHC) and Sturm Ruger (RGR). (March 24, 2016)
SWHC RGR SWHC
This weekend I want to look at Smith & Wesson ( NASDAQ:SWHC ) and Ruger ( NYSE:RGR ), here’s why: Sportsman’s Warehouse, whose known to sell a lot of firearms, issued a report (I’m doing this on Thursday, by the way) I think it was today, it might have been yesterday, where they essentially said that they thought gun sales were slowing down and that the big rush due to terrorist attacks, etcetera, etcetera, had actually caused the gun sales to be kind of front loaded. In other words it’s not like everybody’s rushing to the store every single day and new people are buying guns all the time. It was just more like a big rush and then of course a lot of existing gun owners are stocking up and buying more for various reasons. Anyway, that’s the back story why this stock went down. This has been a stock that has been extended. I like Smith & Wesson ( NASDAQ:SWHC ), I’ve liked it for a while, the stock and the firearm. I’ve liked this stock for quite a while, since about $20.00 or so.
But this volatility is getting kind of tough.
What I would suggest you do with this stock, if you’re long this stock I’m not going to tell you what to do longer-term. You can see this trend, but whether it’s on a weekly or a daily chart this is a stock that is overextended. This was institutional distribution on Thursday. At the very least I think this stock will come down and test the 50-day moving average. The uptrend is still intact, but you can look, sideways consolidation, it got a little choppy here and more sideways here. But ever since this blast off here last December the stock has been trading in a really wide range. And if you just look at the 50-day moving average, that’s the red line, you see that the slope is really starting to steepen. Strong stocks do that, we love it when they do that, but we hate it when they do this. So I would suggest keeping a tight stop on this position, unless you are willing to hold it for further declines. This stock will decline further.
You look at Ruger ( NYSE:RGR ), you’ve got a similar thing. This is not a one day wonder, where these stocks trade off and then people decide, “Oh, well that was a bad thing, everybody’s is buying guns.” And then the stocks move higher. These are expensive stocks and I think they’re just due for more downside. Would I short them here? No, absolutely not. This is a weird market for shorting, I wouldn’t do that with these. But I certainly would not want to be long these stocks right now, unless you’ve got some massive capital gains that you don’t want to pay taxes on; just ditch them. Look to buy, I would say, Smith & Wesson ( NASDAQ:SWHC ). Later, lower.
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