Tailored Brands ( NYSE:TLRD ); this is Men’s Warehouse, they changed their name. Look, this is really a pretty interesting chart. First of all, that is a pretty interesting number. They don’t report earning for another couple months, and that is a good thing because I love to see these squeezes. The last big day was an institutional buying day, right there. How do we know this? Because the stock traded about 10 million shares. That isn’t Billy Bob & Jethro’s Fish, Tackle and Trading Supply Shop, that is big institutions. The stock has been drifting sideways since that time. And then the other thing is, if we zoom out a little bit (lets go to the weekly chart) you can see. This thing took one heck of a haircut, a really nasty haircut. This has been really in base building mode for all of 2016. Real sideways drifty, choppy consolidation for over 10 months, and now we get institutional activity and the stock is staying above the 50-day moving average.
I think this is a stock that you can buy. Here’s is how you can set up this buy: If you look at this last high on the 13th, the intraday high was 17.03. Frankly, I think you could take some stock on a move on Monday above the upper Bollinger Band, which is 16.64. If you take the stock up here just a little bit, I am really slicing this fine, but if you take a little bit of stock on a move above the upper Bollinger Band, we will just say above Friday’s intraday high of 16.62, that is 3 cents. Your next purchase is IF and not WHEN but IF the stock starts rallying above this last high, 17.03. So this is 1, 2, now you are trading a little bit and then your 3rd trade is if the stock trades up above 17.38.
So think about this, how does this work? This is a low-risk way to trade a volatility squeeze. First a peak outside the upper Bollinger Band, which by the way, the last time it peaked outside the upper Bollinger Band, the Bollinger Band played ‘Whack-a-mole’. Boom! It got slapped back down. So you take a little bit of stock here. You only add to your position on a breakout there. And then add again so that you have basically a full position on a move above there. This will give you an opportunity to get involved in the stock earlier and by the time the stock breaks out, if it breaks out, you have a full position size on with a decent cost basis.
Now, what if it doesn’t break out above here but instead pulls back; it breaks out above the upper Bollinger Band and then pulls back? Well, aren’t you glad you only had a small position on? You buy the stock here, maybe even put your stop right back here in the middle of the range. You basically lost about 12 cents in your entire position. Seriously, by taking this stock in this way, you don’t add to the position UNTIL the stock moves higher. If it doesn’t move higher don’t sit there and say, “Well Dan said it was going to move higher so I will just buy some now.” No. I am saying wait until the stock shows you that it is moving higher above this last high and then REALLY make it show you that it is moving up here above that level. Then look at this, EVERYBODY is a winner. The only folks that are unhappy are those that bought last April and May. Trust me, they are long gone. That is how I would try Tailored Brands ( NYSE:TLRD ).