Want to engineer a good trade? Check the detailed plan on Dycom Industries (DY). (April 19, 2017)
We are going to look at Dycom ( NYSE:DY ). This is and engineering, construction project manager company. Why did it spike today and yesterday because they don’t report earnings for another month? So that is an issue. Well it turns out Verizon ( NYSE:VZ ) and Corning ( NYSE:GLW ) or Glass Works as many call it; Verizon ( NYSE:VZ ) here, GLW ( NYSE:GLW ) here, they have got a deal going, formed a partnership on a fiber optic network. And guess who is doing the engineering, all that work on it? It is Dycom ( NYSE:DY ).
Here is the thing: The stock at 107.03, just a couple of days ago it was like 10 percent lower than it is. You can see this volatility squeeze. You can see the huge volume, so the stock does have upside momentum. There is such a thing as the three day rule, which means that the smart money buys on the first day. The semi-smart money wasn’t smart enough or didn’t see it on the first day, they didn’t know what was going on but the second day they do, they buy it. Finally, on the third day, the not so smart money buys it. Once the not so smart money is in then the stock, a lot of times, can kind of peter out and then start to roll over. So don’t just rush out and buy it, okay?
BUT, this heavy volume, institutional buying, 2 million shares, that is a lot. So you zoom out to the weekly chart, what do we see? Well, this is kind of a different picture because we see that this stock has been trading sideways for close to a year basically. It has been trading sideways for close to a year, so I would say $100.00 is the breakout. So if you are buying the stock or if you own the stock now you keep a stop just a little bit below $100.00. That is about 8 percent, “Oh, William O’Neil says keep a sell stop 8 percent below where you buy it.” Okay, that is a great idea. Who am I to question him? But the better way to do it, in my view, is to take a smaller position and have a tighter stop. But you can’t hardly do that here because the stock is up so much.
So I would just say this: If you want to get involved in this stock it better be from a weekly standpoint, because you like the way this is trading. You will kind of consider what to do with it when the stock gets up to, lets do a little measured move here, the bottom to the top, that is 26 we will say 25 so we will go up another 25 points. When the stock gets up to 125.00 then I will figure out whether I want to sell it or not. If that is not your trade, instead if you are a fast money kind of guy, I would steer clear of this, or at least keep a very, very tight stop on this. There is a short interest that is worth looking at, it takes over 10-days to cover, so this is definitely a short squeeze. But I can’t look at this and say it is going to Pluto because of the shorts. I can just say, you are chasing the stock if you are buying it tomorrow so you have been warned, trade accordingly.