Are you in on Tarena International (TEDU)? Here’s how you trade it! (March 08, 2017)


I want to look at Tarena ( NASDAQ:TEDU ). The stock really, really blasted off a few days ago; I mentioned this move above 16.00 was a buy signal. You could have actually been a bit more aggressive if you were watching this stock, because it had been squeezing for a while. Say you set an alert right at this level, like right there, so you set an alert at this level, you are buying the stock. The company reported good earnings; it is an educational company over in China.

So what do you do now? The stock really rallied hard. You can see yesterday, massive, huge volume. It is up above the upper Bollinger Band, two standard deviations. It is not really supposed to do that, it is kind of like there is a law of mathematics somewhere, where the stock isn’t supposed to close outside the upper Bollinger Band on two standard deviations, certainly on three. Lets just look at this, so you can see even yesterday the stock closed above three standard deviations, which only happens about .01 maybe .02 percent of the time. In other words, virtually 100 percent of the time this doesn’t happen. So the stock was really ripe to rest, which is what it has done today.

So what do you do, and this is not just for TEDU ( NASDAQ:TEDU ) but for any stock that pops like this on earnings? You want to ride this thing as long as you can. When a stock moves up like this, with such a huge magnitude on volume, a lot of times the next day it will gap up even more. We can discuss a gap and crap or a gap and run, or whatever, but a lot of times the stock will gap up even more. It didn’t do that today, not a big deal. But what is a big deal is, the stock is just trading sideways. So here is the way I trade this: On this kind of move when the stock was up at one point over 15 percent where it was on the breakout, I am looking to sell into this a little bit. Not everything because, zoom out, look at this, this is a pretty key breakout, this stock could go to 900. The point is, it is up at an all-time high. It just went public a couple years ago so it is up at a new high. The thing about stocks that make new highs is, they kind of keep on making them. So I would sell into this a little bit.

Now what do you do with the rest? Whatever the rest is that you have, split it in half. Put a stop on half of what you have left, say a little under 17.50. This is assuming you are profitable, that gives you less than 3 percent downside on that. And then the last part of it, just let it run. If it is a short-term trade that is kind of a different deal. But you look at this, it has been consolidating for quite a while. The fundamentals are pretty good on this, if you call a 77 percent annual growth rate good. I am looking at the fundamentals like earnings per share over the last several years, it has just been kind of a steady increase. So fundamentally the company looks good. Technically the stock looks good. You just need to decide whether you are trading or whether you are owning. The way this stock looks right now, to be honest with you, I feel like buying a little tomorrow for a long-term hold. But instead I am just going to sit and wait for the stock to pull in a bit.

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