Here’s your trade on a private mortgage insurer. Check out Essent Group (ESNT) (October 12, 2016)
ESNT SP-500 ESNT
I want to look at Essent Group ( NYSE:ESNT ) here, it is a PMI company, private mortgage insurance. A nice chart here. I started out on the weekly to give you a sense of how long this company has been in existence. A couple years, right? It is back close to this all-time high, but that was over a year ago, right? When you are looking at prices that are frankly, over 3 or 4 months old, that is almost irrelevant to me. When you are looking at prices that are a year old they are not really relevant to how a stock is going to be trading today. So here is our perspective with an all-time high, we will call it 30.00, though it never actually got up that high. Now we look at it here, this has been drifting close to the 50-day moving average and now it is starting to break out on volume. Relative strength is good. Relative strength versus the SPY is really good here. The fundamentals, pretty strong growth, really pretty strong growth rate. Float, 74 million, there are plenty of shares.
So I am just suggesting this: That the stock is up at this last high here, it is coming up on volume. This is a stock that you can start building a position on. If the stock pulls back then it wouldn’t really be a trade it is more like a holding stock. The stock pulls back a bit, you buy some shares. You don’t buy any more if the stock goes down. You wait then and once the stock starts trading above 28.75 or so, then you go ahead and add to your position. And you are in a strongly uptrending stock, these big bars here are all green. We like the green ones because that indicates institutional buying. This is what we are seeing here. A strong move today on a real crappy day in the market, just kind of a blah day. So this is a stock that I think you can own. By the way, if it starts trading back down below the 50, which is less than 5 percent below where the stock is now, then you don’t want to be long the stock. So this is kind of a low-risk trade because the stock doesn’t have to fall 15 percent before you will know whether you were early or just flat out wrong.
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