The hot dog pattern is complete. Here’s your trade on Cal-Main (CALM). (March 02, 2016)
CALM
I want to look at Cal-Maine Foods ( NASDAQ:CALM ); eggs here, right? This has completed the “hot dog pattern”. This is a well-known pattern that I actually just made up the other day, there’s no such pattern. Here’s the deal: I was looking at this here, uptrend here and then a gap higher, a close lower, this is known as a bearish engulfing pattern, where basically this day’s gains were TOTALLY rejected by the bears. The next day RIGHT at the open, or close to it, the stock gaps up and then fails. It COMPLETELY dwarfs the prior days close. Then the following day I was looking at that and mid-day, when this was up near the high, I was going like, “That kind of looks like a long hot dog on a hot dog bun,” these three right here. Okay I’m totally stretching things, I know it’s really not, but I couldn’t help it, that’s what I thought of (my mind works in that way and I can’t explain it, I feel embarrassed about it).
Anyway, I’d mentioned to one of our members, because some folks have been trading this for a while coming out of this squeeze. I mentioned this has to get up above this congestion in order to really confirm that this is a continuation pattern and the 200-day moving average is going to hold. Well, Boom! The next day not so much. And then finally now we’re getting a higher close. Volume is a little bit light but here’s the deal: I think you can still buy this stock. My suggestion would be though, because you want to define your risk, especially early-on in the trade when you don’t have any profits it’s just your money, keep a stop just a little bit below that level. Because if we’re right about this, because this move, sideways consolidation, then a continuation, that stop should be just fine. But if we’re WRONG and this is a big move, sideways consolidation, and then a failure, well we don’t lose that much money. So if we need the stop we’re glad it’s there. If we don’t need the stop, Hey! No harm no foul.
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