Green Mountain Coffee Roasters (GMCR) is still strong as it transitions from Phase 2 to Phase 3 of our volatility squeeze assessment. Here’s my take: (December 19, 2012)
GMCR
I’m Dan Fitzpatrick at StockMarketMentor.com on Wednesday, December 19th. First of all, if I forget to later, and I probably will, I just want to wish everybody Happy Holidays and I hope you have a safe, and fun, and rewarding Christmas season. I know we’ve just got come through Thanksgiving, which is the traditional time to give thanks for our blessings, but you know what? I think 365 days a year isn’t too many days to do that, and certainly during this holiday season it’s time to be with family and friends and appreciate the ones that love you the most. Anyway, Green Mountain Coffee Roasters ( $GMCR Green Mountain Coffee Roasters Inc ), I’ve talked about this before, as far as the volatility squeeze, and I just want to follow this through. There was this squeeze and then we got this tiny break out here, for like a morning, and then a pullback. Now we’ve got another, you know, kind of a follow through, so I look at this is as phase one, and then this long red bar there, that’s really the extent of phase two, that’s the pullback, and now this is drifting higher. Typically there’s a lot of different types of volatility expansions that are kind of directives of this, this isn’t really the textbook one; this had a heck of a move, I mean a big move from under $30.00 to over $40.00 in just a matter of days. It’s kind of easier to trade them, frankly, when you get a big move, not quite this big, and then a pullback that’s closer to support, and then a bounce. Why is that safer or easier to trade? Well, because the pullback does not leave the stock so extended, see the pull back comes closer to this consolidation level down here, or to these moving averages even. But this stock didn’t pull back much at all, so this is, actually, a real sign of strength. If you look at it on the weekly chart, you can see definite change in character and it’s walking along the upper band, outside the upper band, four weeks in a row Green Mountain Coffee Roasters ( $GMCR Green Mountain Coffee Roasters Inc ) is trading above the upper Bollinger Band; that’s really not supposed to happen, It’s not supposed to happen at all, well, not at all, but very rarely. So we have a big move here. Now what do you do? It’s hard to figure out, it’s just hard to define where true support is, but, and what I mean by that is, is it here, or is it down here, or is it down here? The reason I’m mentioning that is, because you’ve got to define your risk, you have to define your risk. If you just buy this stock, without any kind of a plan, and it moves in your favor, well, that’s great, who needs a plan, let’s just make money. But if it starts to move back, then at what point do you cry uncle and say, you know why I’m wrong on this trade? So what I’m suggesting is, I don’t care where you put your stop, I don’t care whether you put it here, whether you put it down here, or even whether you put it here, definitely shouldn’t have it below there. What I want you to do is just make sure you’re defining your risk, but also know this, if GMCR ( $GMCR Green Mountain Coffee Roasters Inc ) runs above this level, above this high here, this stock is going a lot higher, because what it means is, that everybody who bought here, they’re all winners, and the profit taking, that you would expect after a move like this, has run its course and this stock is still moving higher, excessive demand. So watch this $42.60 level, it’s ninety-cents above where it is right now, and also, zoom out and see where this thing has been, I’ve talked about this before, very, very, very prolonged base here, now this stock is moving higher, so it does have quite a bit upside here; just keep that in mind, there’s no way I would be shorting this stock, we could be getting a little bit more of a short squeeze, hard to know. But here’s the deal, earnings are not until March, and so any real catalyst for this stock, going forward, will be upgrades and downgrades, shouldn’t be anything else coming out, so just watch this stock, but watch for more upside on it. Okay, one more thing, I am teaching an option course in January, we haven’t finalized it to a point where we’re ready to start opening it up for registration, but I want you to keep that on your calendar, it’s definitely going to happen, and that will be on January 12th, that’s the second Saturday of the new year; it’s going to be on January 12th, so hopefully you can check that out, it’s going to be a lot of fun for me. Free Chart