EarningsBeats.com Digest for June 8, 2020
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Despite Huge Rally Last Week, Pullbacks Still Creating Opportunities
It's difficult sometimes to commit new money to a market that has seemed to go up every week since the March 23rd low. But the reality is that money still rotates. Yes, the majority of stocks generally move up when the overall market advances, but not all stocks participate in rallies. Stamps.com (STMP) had been a leader throughout the pandemic, but actually has fallen three of the past four weeks, including last week's 9.45% drubbing.
The obvious question is whether STMP now represents a buy. Well, let me first say that STMP has seen a few MAJOR gaps up and down the past 18 months. So if you decide to take a position, understand that the stock has seen incredible volatility, falling from over 200 in February 2019 to 32.54 in May 2019, and now back to 179.43 currently. And that's actually down from 221.73 on May 11th, less than one month ago. Here's the one year chart:
February's high close was 174.47 and STMP showed increasing volume as it cleared that resistance on May 6th. The last four weeks represent consolidation and profit taking. As STMP moves back closer to 174.47 and the rising 50 day SMA, currently at 164.49, the reward to risk looks better and better from a short-term trading perspective. This doesn't guarantee that price support holds and that STMP becomes a stellar trade. But it does set
the stock up in a position where we can manage downside risk to some degree, and that's very important when I trade. I say "to some degree" because as I mentioned earlier, we've seen significant gaps in both directions on STMP, so holding this stock overnight has added risk for sure. If you're someone that doesn't tolerate risk very well, I'd steer clear of stocks like STMP.
Happy trading!
Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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