Here’s your trade on HealthEquity (HQY). (February 13, 2018)


HealthEquity ( NASDAQ: HQY ). I am drawing this resistance line here, supply. This is where supply lives at $55.00. The last few times the stock has tested this and it has been on four different occasions. The move here and then the following day it moved up again. Fast forward several months, the move here and then the following day it followed up again as well. So, on four specific days $55.00 came and went, that is where supply lives.

Now the stock is $1.60 below that level. The company reported earnings just last week. Huge massive volume, the stock traded down; at one point it traded down over 8 percent on the day but then ultimately closed down just 3 percent. That is still a big nasty decline, not really good. But after earnings the stock starts drifting up.

So this tells me that we have got increasing demand for the stock. Supply is still there; weak hands still holding the stock, looking to unload it, but the stock is still drifting. And so supply is diminishing while demand is still strong, strong enough to push the stock up. This is a choppy stock, no question about it. I guess you could say this was a squeeze way back here but we are not there now, we are actually expanding. So again, I have got to say it, this is a choppy stock.

This isn’t a good entry here frankly; I can’t find you good entries every day but I can find you good stocks. This wasn’t a great entry when I bought it but this is how I am trading it: I take a small position, that position will never get bigger unless this stock starts pushing through $55.00. I am not trying to, “Oh, I will build a position before the breakout.” I don’t know if it is going to break out so why would I want to do anything BEFORE something is supposed to occur when I have no idea whether it actually will occur. It just doesn’t make sense unless you are just guessing.

I used to guess but I found out that it didn’t really pay very well so I don’t do that anymore. Now I estimate and I manage my risk. So I take a small position here. If the stock starts breaking above 55.00, I have an alert set on my software; give me the hit. When the stock hits 55.00 that is when I will add to this position. By the way, you have got to keep your stop down below 48.00 or so and so it requires a little bit of a wide stop there.

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