It’s Not Too Late to Snap at Crocs
Crocs (CROX) has been a stellar performer since the 3rd quarter of 2006, running from $12 to almost $50. The most difficult thing about a strong stock is the difficulty in buying it. It’s usually a bad decision to buy a stock that has been running like the Energizer Bunny because the only reason a stock runs like that is because of rampant buying.Rampant buying doesn’t last forever, so it’s always a risk that you’ll buy the stock right when everyone else starts selling. And it’s no fun to arrive at a party right when everyone else is leaving. Let’s see if that’s the case with CROX.
Here, CROX has been running along a steep uptrend after gapping up to $32.50 in early May. After that gap, the stock ran another 30% before pulling back. But notice how the pullback was relatively mild (of course, if you bought at $47.50, the pullback didn’t feel that mild).
The stock bounced right at $50 — an even figure that is a logical place to put limit buy orders. That establishes a new level of support that can be used as a reference for additional trades. So how could this play out?
If the stock falls below $40, then we have a pretty good idea that the buying interest has all been satisfied and the best move is to just stand aside and wait for the selling to stop.
On the other hand, we’ll know that additional buying interest exists if the stock just trades sideways for a while. That would be the healthiest development because the churning builds a base from which even higher prices can be reached.
And if CROX instead just blasts above $47.50, you’ve got to look away from the buyers and focus on the sellers — because they are few and far between! And when nobody is selling a stock that’s more than doubled since mid-March, you don’t want to be selling either — you want to own it.
To see a video analysis of CROX using some different indicators, click here.
And if you are interested in learning more about integrating technical analysis into your trading toolbox, you might want to check out one of my upcoming workshops.
Dan Fitzpatrick
www.stockmarketmentor.com