Tarena International (TEDU) — schooling the bears. (March 09, 2017)


We are going to go back to Tarena International ( NASDAQ:TEDU ). I talked about this last night so you may want to check out that video, if you haven’t already, and here is why: Because this is a trade that is still going. I mentioned yesterday that the buy signal was here when the stock broke out through this volatility squeeze, the upper edge of this volatility squeeze, and then the stock kept moving. So this is the high volume day; this is Tuesday, big, big, big wide ranging day, looks like a climax high to me. You would expect to see the stock pullback just from an exhaustion of buyers, nobody is left to buy. And once the stock moves from 15.50 to 18.50 in like two days, I would say it is time for Elvis to leave the building. But that is not what happened yesterday. The stock just traded around here.

My suggestion was, look, you see this consolidation, it looked a little bit like NetEase ( NASDAQ:NTES ). You can sell into this a bit but hold some of your stock and keep a stop just below yesterday’s intraday low of 17.61. If the stock starts falling below this level then the move is over and you need to get out. It was a short-term trade. If it was not a short-term trade then don’t even worry about this. But when you see a stock doing this it is a short-term trade. So you keep a stop below there because you want to position yourself to make money. You want to position yourself to stay in the trade as long as it has a chance of working. But also to get out of the trade if that chance of working starts to look more and more like hope.

So you keep a stop just a little bit under that level. I am going to go ahead and extend this out, so the deal here is, as long as the stock stays above this horizontal line, which marks a little bit below Wednesday’s intraday low, you want to stay long this stock. Because this thing could just continue to move higher. Look at it on the weekly chart, it is a recent IPO, a couple years back, hitting an all-time high. So you want to stay long this stock but you have got to exercise some kind of control over your capital management. So you keep a stop under here. If the stock starts moving higher, say up above 18.50, then you go ahead and start raising the stop. Maybe even, probably buy some more stock above 18.50 and then get ready for this thing to continue higher.

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