Here’s your trade on Restoration Hardware ($RH) (November 10, 2020)


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I am looking at Restoration Hardware ( NYSE: RH ); why? Because this stinking thing has been trading sideways, just chopping you up forever. After they reported earnings in early September, late August the stock has been chopping around, staggering around sideways for 2 months. That’s the way this stock can be sometimes; you see the same thing here. It tends to trade in a tight range and then break out, it can break out one way or another but over the last year, typically, upside.

So what are we going to do? You can’t buy this stock now because all you are really doing is, you are anticipating that the stock is going to break out and it might but it also might not. Over the past few months, might not has been the one that’s won the day. So I wouldn’t really be buying this stock here.

If you are buying it, if you are anticipating an upside breakout, and it could happen, I wouldn’t count on it though. If you are doing that just make sure you are taking a small position and I guess you would kind of have to have to keep a stop below 335.00 because this is really the channel that the stock is in.

Rather than do that, because I just think that’s a low percentage trade, the stock has been in a channel. And until it breaks out of the channel, guess what? It’s still in a channel. Rather than doing that I would kick back, I wouldn’t trade this and I would set a price alert at $400.00. If the stock breaks out above $400.00 you won’t mind having missed out on the $18.00 run that it took the stock to do it because at least you got some kind of certainty that something has changed.

If you are buying right now you don’t have any certainty that something has changed you just have a feeling. You think it’s going to, you hope it does. You’ve got intuition; my intuition tells me that this stock is going to break out. Okay, stop and think about that for a minute. I can tell you, if your intuition tells you that the stock is going to break out you don’t have intuition you have wishful thinking.

There is nothing that says the stock is going to break out here. In fact, after yesterday’s slight little gap and reverse on volume, I say the stock has more sideways grinding to do. But if the stock, IF the stock breaks out above 400.00, then in my view, that is actionable.

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