What do you do when Five Below (FIVE) is ten above? You sell. (September 06, 2018)


We are going Five ( NASDAQ: FIVE ); not five below but more than five above. The company reported earnings and the stock is trading up after hours. You can see how far it is up, it is up almost 10 percent, it was up 10 percent at one point. So the question is, what are you going to do tomorrow?

Here’s the deal: First of all don’t buy it; seriously, just don’t buy it. It is always risky to buy a stock that gaps up so much. You could say, “Well, look where it is now. It is up at 115.00, 125.00, if I had bought here on the last gap I’d be up really nicely, I’d be up 28 percent.” Right, but you also had to sit around and hang on to it for a quarter. Actually, the stock did, in fact, drift lower. And what was it doing? It was actually just kind of drifting closer to the 50-day moving average. Way up here, over time here it is, the 50-day drifts up, Boom! There it is. So now the stock is up here; the 50-day is here.

So what are we thinking? Well, it could; you could see it do just this again. Maybe come back down, whatever. That’s fine; that is not what I am talking about; I am just throwing this out. What I am saying is, this is not a stock that you want to be buying tomorrow and here’s why: Because my bet is, if you are looking at this video and you are saying, “I wonder what Fitz has to say about Five Below?” It is probably because you own it. And if you own it and you are watching me do this video, aren’t you thinking, I think I am going to sell this thing. I took a chance, I held the stock over earnings, I am going to sell this thing. I am going to sell into these people and I wish Fitzpatrick would shut the heck up because he is taking away some of the demand here.

Okay, whatever. All I am saying is, good traders sell into strength. You can buy into strength if you are building a position, momentum and all that jazz. But when a stock is doing this, fine, you’re buying. But when it starts doing this, you’re selling; that’s just the way it goes.

Right now Five Below ( NASDAQ: FIVE ) is definitely doing this. So you want to sell into this. And then one other thing, I will just say, don’t short this stock. There is a difference between selling and shorting. Selling is taking profits. Shorting is betting that you are shorting right at the top. If you are short-selling you want to be selling stocks that actually weak, look like they were going to recover and then didn’t and that is when you are shorting the stock. You are not shorting the stock on this assumed upside down “V” pattern; it’s not going to happen. This is a strong stock, sell into that strength tomorrow.

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