by Shane Ormond
On Feb 20, 2020
Shares of Groupon and Blue Apron tanked yesterday after their quarterly reports reignited skepticism about the companies’ “unconventional” business models. (And by “unconventional” I mean “doesn’t work.”)
Blue apron, groupon, e-trade, morgan Stanley
Blue apron, groupon
Yesterday, we looked at a monthly chart of ASML Holding NV, noting the stock has been on a bullish run since April.
Today’s Chart of the Day is a Keltner Channel chart for Vanguard Health Care ETF (NYSE: VHT).
VHT seeks to track the performance of the MSCI US Investable Market Index (IMI)/Health Care 25/50, an index made up of stocks of large, mid-size, and small U.S. companies within the health care sector.
Now, the Keltner Channels serve as an overbought/oversold indicator. When the daily stock price is trading above the Upper Channel, it signals that the stock is overbought.
Stocks in a price uptrend do not advance in a straight line. When a stock becomes overbought, it normally declines in price as the inevitable profit taking occurs.
There are always price retracements along the way as this happens.
Below is a Daily Price Chart for Vanguard Health Care ETF along with the three Keltner Channels (Upper, Middle, and Lower).
The VHT chart shows that VHT is in a strong price uptrend, and recently became overbought many times as the stock traded above the Upper Keltner Channel (circled in blue).
As you can see, after trading above the Upper Channel in all scenarios, VHT experienced a pullback — though it always continued to rally afterwards.
If you want to participate in this rally, where is the best place to enter?
We use the Keltner Channels to help us select a lower-risk entry point.
A Keltner Channel “Buy Zone” occurs when a stock is trading below the Upper Keltner Channel. Once the daily price is trading below the Upper Channel, it signals a buying opportunity.
If you had purchased VHT shares when VHT entered the “Buy Zone” around November 5th, you’d be up 11.14% on the stock by now.
Knowing that VHT shares are continuing to rise, experience pullbacks, and rally again, we’ll be paying attention to future pullbacks in order to get in at the lowest entry point.
Maximizing Our Profit Potential
Additionally, we’d like to talk about how a previous Chart of the Day stock has done…
On December 20th, we highlighted Dick’s Sporting Goods Inc. (NYSE: DKS), noting that DKS had been trading in a bullish trend after its 1-Month price had crossed above the 10-Month SMA in September.
If you happened to have purchased DKS shares on that day, you’d already be up 4.43%.
But… if you had purchased the right option contract, you would be up 39.32% in less than a month’s time!
That’s the power of options.
But we know that some people like to walk before they run… and so we designed a class just for them, called the Thunderbird Options Course. Complete with syllabus, videos, and quizzes. Check it out if you haven’t yet!
Editor, Chart Of The Day