Mohawk Squeeze Play Analysis
Mohawk Industries (MHK) was on our Squeeze Play list at StockMarketMentor.com in early May. The Squeeze Play list contains stocks that are either trading in a very tight range (a volatility squeeze condition) or have a very high short interest (short squeeze condition). The idea is to capture the bulk of an upside move by identifying the lowest price at which the stock can trade up to and trigger a rapid buying frenzy. This is as much art as science, but it worked pretty well with MHK as it triggered our alert at $94 and quickly ran as high as $104.87 on the day it broke out.Is the stock still a buy? Let’s take a look at the chart.
If we ignore the long candle wick that runs from about $96 up to $105, it sure looks as if the stock is close to breaking out of a fresh volatility squeeze. However, it is hazardous to your portfolio’s health to ignore such a wide intraday price swing. So let’s look at a shorter timeframe to get a sense of the intraday action and find out where the real resistance is.
Notice how this 30-minute chart tells a different story? Much of the trading volume occurred between $97 and $98. As such, I’d look for any advance to that level to encounter some determined sellers who will be happy to get out at a break even. If the bulls can push the stock above $98, we could see a challenge of the $104 level.