Getting Into NutriSystem on the Skinny
- Posted by Greg Harmon
- on November 19th, 2013
NutriSystem $NTRI, started to move higher in June after a 8 month period of going no where. Break outs of a long base are very attractive to technical traders as the often carry very large price moves. NutriSystems has been one of those, moving over 100% since that breakout. But the current chart pattern sets up well for a trade if you have missed that run. It is currently building a bull flag after the near parabolic move higher from late October. That is a good thing two ways. First it is consolidating the move higher, holding at the price, showing that sellers are not showing up after the strong gain, or they are met with new buyers. Then, the technical pattern is a trade set up for another leg higher. A flag often happens in the middle of a run higher, suggesting that a break above the top at 20 might give rise to a move to 24. Symmetry would
suggest that the timing could be very quickly and the short interest at over 14% backs that up with the potential for a short squeeze. The candle printed Tuesday, a Spinning Top doji, signals indecision and is happening on the 20 day Simple Moving Average (SMA). This is not a definite signal that the price will reverse immediately but means it is time to start watching for it. You could buy the stock on a break over 20 for this move, or on the cheap, use a December 20 Call for about 30 cents. That is about as much at risk as if you used a 3.5% stop loss. If you think that is not enough time then the January 20 calls at about 50 cents raise the cost slightly for another 4 weeks of price action.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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