Here’s how we trade the squeeze/expansion on Green Mountain (GMCR). (December 03, 2012)

by DAN GMCR 
I’m Dan Fitzpatrick at Stock Market Mentor on Monday, December 3rd. In this video we’re going to look at Green Mountain Coffee Roasters ( $GMCR Green Mountain Coffee Roasters Inc ). This is one that I’ve talked about before with respect to this volatility squeeze, so let’s go through the typical pattern of the squeezes. First of all you need the squeeze and then phase one is the initial move higher, we got that there, phase two is the pullback to test the break out, here that pullback was successful, you put a stop right there, and then finally phase three, let me zoom in here, phase three is when the stock rallies back above this point, back above this phase one high; that was $30.14. We had a big gap here, you know that was a heck of a move, if you were in before then you’re happy, but even if you weren’t you could still have bought on this initial move here, the open at $34.55, it’s always tuff to buy these big gaps but ultimately it works, you know, you’re up about $3.00 from that opening print and Green Mountain ( $GMCR Green Mountain Coffee Roasters Inc ) is still going. Now, let’s talk about how to trade this. First of all you have to understand these Bollinger Bands, they’re just creatures of statistics, they’re supposed to contain 90 or 91 percent of all of the closing prices, that’s the norm. This is why they expand, by the way, when prices are running away one way or another, Bollinger Bands expand to ultimately capture or catch those prices. Well, this stock has moved up so strongly that one, two, three, four days in a row Green Mountain ( $GMCR Green Mountain Coffee Roasters Inc ) has closed above these upper bands. That makes for a move that is really ripe for a pullback or at least a rest. So what I would suggest doing is if you’re long Green Mountain ( $GMCR Green Mountain Coffee Roasters Inc ) use yesterday’s intraday low, that’s $35.69, less than $2.00, little bit more than $2.00 actually, away from this current close; use that as a basis for stops, if Green Mountain ( $GMCR Green Mountain Coffee Roasters Inc ) falls a little bit below that you probably don’t want to be long the stock, if you’re really aggressive on setting the stocks you can even use the intraday low of $37.12 today as a stop. However, if you do that, if you set your stock that close, frankly you’re going to get stopped out, I’ll just tell you, you’re going to get stopped out, so if you decide to use the more aggressive stop, why not just take profits and just get out of the trade? Or at least take half of your profits off the table, stay with the other half and then set your stop below yesterday’s, that’s Fridays intraday low of $35.69, make it like $35.60, something like that; that way you’ve locked in some profits on Green Mountain ( $GMCR Green Mountain Coffee Roasters Inc ) and you’ve also locked in a small loss and that’s assuming you bought here or something, you’ve locked in a small loss or you’re at least containing your down side on the remaining part of it. So that’s how I would trade Green Mountain ( $GMCR Green Mountain Coffee Roasters Inc ). Now members, there’s a lot of short setups and so I’m going to talk about those with specificity in tonight’s Strategy Session so I want you get over there, also to anybody, if you’re not a member check it out, you get a risk-free 30-day trial so go over there to do that, then you can see what I’m talking about in the premium section.

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