Three alarm fire in the bear district!!! Check out this breakout in Alarm.com (ALRM). (October 02, 2017)SP-500 DJ-30 COMPQX DJ-20 MDY IWM SPY XLF JPM XLF JPM GS MS ETFC SMH SOX--X XLF DJ-20 XRT SMH SEDG AMAT CGNX EXAS NVMI CHKP PRLB CZR WYNN LVS CZR LVS WTW TVTY SMP AMD WTW AMD GSK SP-500 GSK
Just a quick look at Alarm (NASDAQ:ALRM ) here. This is a pretty popular stock in some circles, and we know why, you can look at the chart here. The fundamentals are really, really strong with respect to earnings and revenue growth. Sales or revenue growth is, over the last four quarters, compared to the same quarter the prior year, the growth has been like 26 – 30 percent, depending on the quarter. So that is like an acceleration in revenue growth.
You see a similar thing only with bigger numbers in earnings. This last quarter into June was 120 percent better than the prior year. In 2017 the earnings are expected to be off the charts and the stock is reflecting that. We got a nice break out today. I think this move is likely to continue. We don’t know for sure. I just know that these volatility squeezes out of sideways consolidation patterns like this; these breakouts tend to work really well.
Here, if I was going to quibble, and I will, it would have been nice for the stock to really have drifted sideways for a bit longer; allow the 50-day moving average here to catch up to it. I would prefer the break out towards the middle or end of this month as opposed to right now. But I don’t get a vote.
What we do is, we look at this high here, 47.12 where the stock closed at, and then we would buy the stock and keep a stop right back in here. You want it right back in the middle of this consolidation here. It doesn’t have to be lower than that because the whole reason you would have a stop here is, you are buying the stock because you think it is going to continue to break out. You think it is going to continue to move higher.
If you think this is just a fake out and the stock is going to reverse, well, you are not going to buy it here, you are going to wait and see if it is true. And so that is why we would put a stop right back in here; because all you need for it to do is get to the, “Yes, it is true, this was a fake out.” All you need to see do it is get to that level and then you would sell. You don’t want to buy it if it is a fake out. So you take the stock right here, 47ish, keep a stop a little bit below 45.00. If the stock continues to work you are in the money. If it doesn’t continue to work you have taken a small loss.
The most important thing to know is, traders, money managers, big funds, they look for this type of thing. Strong, steady, consistent, accelerating growth. That is why the stock has done what it has done here. This is not a new thing; this is just a new leg higher, so keep that in mind. Take it for what it is worth. I am long this stock; I may even buy some more tomorrow; it is hard to say. But, own this stock, it is working.