Round 2?

I have written many times about the appeal of investments that are breaking out from a consolidative base. Often times, depending upon whether there is a pattern formed within that consolidation, it can provide a target price for that breakout move. Keep in mind, targets best used solely as a way for investors to calculate and manage risk, definitely not a guarantee. But, if they eventually meet their target, many times it is not the end of the move … it could be just the beginning. It all depends upon price structure at that time.

Recycling the bitcoin chart GBTC from my April 10th follow-up blog post, the breakout from the consolidative base led to a quick 40+% gain, peaking just slightly above its target, T1. Initial breakout targets also provide information about where the next level of consolidation is likely to occur, if the target is achieved. Back to the GBTC chart, right on queue it did exactly as expected after acheiving its initial target, it began to consolidate and has been doing so for 3 weeks. That consolidation has allowed the froth to unwind and allow those that wanted to sell, the opportunity. What I never talk about with breakout opportunities is the possibility the initial breakout being the start of a much bigger move. Something that would extend much further than just the first upside target. In the case of GBTC, this seems like a real possibility. During the recent consolidation after reaching its intiail upside target, GBTC has formed another bullish pattern which points to an even larger upside target, T2, if the pattern should confirm. Confirmation, of course, is validated through a gap or strong move above the pattern’s neckline (green horizontal line) with volume that is significantly greater than its current average. A back-test and hold of the neckline after breakout would be welcomed and provide investors who missed out, an excellent, low risk chance to enter a position and get involved in round 2 of what looks to be a continued bitcoin run

Lyft Off?

Long term readers know my distaste for buying IPO’s. It’s only because historically those that initially buy an IPO will only make money if they trade it. 99% of investors don’t know how to trade so it usually ends up badly because IPO’s are all about hyping a known company, drawing in the dumb money so the smart money (the initial investors and the bankers bringing them public) can get out.  This is why you typically see a ramp up when a company initially goes public and then the stock price comes crashing back to reality. Not always  …. but most of the time and the reason to make money on IPO’s, you need trade rather than buy and be a part of the crash.

The better strategy is to wait until the stock price falls back to earth and then buy, assuming it is a company worth my investment capital. The recent IPO, LYFT is a good example of what occurs. The major difference between LYFT and most other IPO’s is LYFT never got the initial buying boost as it peaked on first day of being public and has fallen almost 40% from peak to trough since. This is a rare occurrence for IPO’s but make sense when you consider how over capitalized the company is. Its long-term prospects may be good but a company making no money, has competition everywhere and a market capitalization of more than $20B is, shall I say it, overvalued.

As a for-profit investor it doesn’t mean the stock should be ignored, especially if it presents a price dislocation and is setting up for a potential directional change to the upside like it currently is. Taking a look at the shorter term, 2-hour chart of LYFT below, you can see it has formed an inverse head and shoulder reversal pattern during its recent sideways consolidation. This is a constructive setup if it breaks, holds and confirms above its neckline as it presents an upside target near April 11ths highs, a 15%+ gain.

 While I really like this setup as the risk to reward is excellent and as such took a few shares in my trading account early before any breakout occurred, I do want to warn potential followers the company announces earnings next week on 5/7/19. As a general rule I prefer not to hold shares into earnings but will under 2 conditions 1) if I have enough cushion in my entry price to give a high probability of a profit on the investment if poor earnings cause the stock to fall and I get stopped out and 2) if my position size is small enough to ensure a small and contained loss if earnings should cause the stock to fall. Either way its all about risk management.

3 More Months? No problem

If we can add another 3 months of economic growth, the US expansion from the 2009 financial crisis bottom will exceed the longest in history. What makes this most interesting is that while it will likely turn out to be the longest expansion, it is on target to also be the weakest in history (annualized GDP)

Investing in Love

As a basic human need, investing in love seems like it would have great possibilities. No matter your age, gender or preferences everyone, at some point or another in their life (sometimes more than once) is “available’ and looking for love.  Technological advances make it so much easier now to meet people and avoid the “bar scene”. Match.com, MTCH, is one of those that seems to have caught hold … well, at least the stock has.

Since its IPO in late 2015, MTCH is up more than 300%. As you can see in its chart below, it peaked in Sept of last year, fell more than 40% and has sense come roaring back. Most recent price action has seen the stock breakout from a cup and handle pattern, pointing to a much higher price target above.

It would not be unexpected if MTCH were to back-test the breakout level (rim of the cup) before resuming its climb higher. Those that missed the breakout can look for a great, low risk entry if this were to occur as the risk could be $2 or less with an upside of more than $20, provide a fantastic 10:1 reward to risk opportunity.

45 Days

As hard as this is to believe, twinkies don’t have an almost perpetual shelf life like the movie Wall-E lead us to believe. Nor would they be safe as a food source after going through a nuclear holocaust as rumor would have. Instead, as their makers of the “Gold Bar” promise, they are only good for 45 days after manufacture. Some readers might not even be aware (or care) that after the original owner (Hostess) went bankrupt, they were resurrected and found there way back to American grocery shelves back in 2013. As all good capitalists, their new owner took the brand public back in 2015 under the ticker of TWNK. Makes sense.

Fast forward to today and while TWNK has not garnered a lot of love from the investment community since going public again, it is currently setting itself up for a nice move higher. As you can see in the chart below, RSI momentum is in the bullish zone, holding above 50 and unwinding a short-term overbought condition. Price is currently consolidating after a strong move higher, above bullishly aligned moving averages (50 above the 200. The two most recent spikes in volume were large green bars indicating institutional buying. Notice also, price has not filled the gap created from last August. From a pattern standpoint, TWNK has taken on the look of a bull flag which provides an upside target, T1, of 15% back near the highs of April of last year.

Investors who struggle to find reward to risk setups greater than the preferred target of 3, TWNK provides a ratio in excess of 5.Preferring chocolate and not a fan of the vanilla twinkie middle filling, I will pass on this and wait for a buy(t) of HOHO in case they ever bring it public.