Stale Bagels Einstein

• Posted by Greg Harmon
• on August 29th, 2013

While creating last weeks watch list over the weekend there were a few choices in the retail space. One of them that did not make the cut was Einstein Noah Restaurant Group, $BAGL. Come on, restaurant group? Really? Well in any regard the chart looked pretty good Saturday. I have put all of the price action since the weekend into the blue box so that you can see easily. The set up this weekend showed a strong Relative Strength Index (RSI) and a Moving Average Convergence Divergence indicator (MACD) that was improving. The price was sitting at a double top and a push through would trigger a Measured Move higher to just short of 19. It is not widely traded with only about 100, 000 shares trading hands on a good day, but hey I was not going to buy that much anyway. I’m not Bill Ackman you know. All it would take was a push through the resistance at 17.15 to set up what could be a 10% return. But look what has happened since then. No trigger Monday

and Tuesday triggers but cannot hold, and with a long upper shadow. Topping Tails comes to mind. Wednesday sees another probe higher fail with a long upper shadow and now Topping Tails has turned into Tweezers Top. You do not have to be as smart as Einstein at that point to drop it from the long break out watch list and look for a move lower. Exactly what happened Thursday. The lesson to learn here is that you should not cheat your entry. If you want to play a breakout you can certainly enter early and keep a tight stop. You had the potential to get stopped out twice in this name. And while waiting for a confirmation of the breakout costs you something in the return if you are right, the number of times you are stopped will likely cost you more if you add them to your performance than what waiting did.

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