Here’s your stretched rubber band trade on Hewlett Packard Enterprises (HPE). (May 24, 2018)


Hewlett Packard Enterprise ( NYSE: HPE ). This is the hardware arm of Hewlett Packard ( NYSE: HPE ). You can see where the stock just absolutely got crushed on Wednesday. And then today, Thursday, we get a turnaround. This is a hammer pattern here. So what I am looking at here is a snapback, a revert to the mean; an oops the rubber band got stretched too far, now it is snapping back the other way. That is the trade that I am talking about here, so it is actually pretty easy.

You can look here and see how far this stock has sold off from the pre-earnings to where it is now 13 percent. And then from the bottom here it is up already, it has made a nice move, about 4 percent or so. The deal is, this is our profit zone, this is what we are looking at. I am looking for the stock to fill this box somewhere around in here. I am not looking for it to break out and move to an all-time high, proving everybody who sold the stock to be wrong, that is not what I am looking at.

What I am looking at is, I am looking at some upside here where traders are coming into the stock tomorrow and they are saying, “This is a deal.” At the same time you are going to have some traders who sold on Wednesday saying, “Oops,” and they are going to be buying back. Some of them, I am sure, already bought back here, they will be buying tomorrow.

Larry Williams, well, well known and a highly regarded trader calls this his “oops” trade. Similar, it’s not exactly the same here but it is the same concept; where sellers sell because they think it is going lower and then the stock moves the other way and they go, “Oops, I will call it the oh crap trade.” It’s like, oh crap I’m wrong, I have got to buy that back. I think you are going to see some more upside here on this stock.

The way that I would trade it would be to buy it at 15.85, which is right above today’s intraday high of 15.81. So you are buying it at 15.85 and you are looking for maybe 50-60 cents, something like that, which might not seem like a lot. But if I can make 3 or 4 percent on a trade in a day or maybe two days, I would take that every single day because you can find this stuff all the time; and so that is your buy point. And then as soon as you are in you put a stop underneath this intraday low. Every trade is a little bit different but this is a real obvious one, it works. So you put your stop underneath 15.15. So basically this is your risk, about 4 percent. You have got the odds on your side that the stock is going to snap back. You are risking 4 percent to make 4 percent, I think that trade is going to work.

Free Chart

Leave a Comment