Here is our Report Card for the week of November 13, 2011
Grade for the Week:
Report Card – Volume 102
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Tag Archives: GMCR
Anatomy of a Trade: GMCR
Date Provided to Members: November 13, 2011
Service: marketJOURNAL
Entry: $43.25
Exit Price: $51.00 (average of two sells, $47.00 and $55.00)
Profit (Loss): 7.75 or 17.92%
Days Held: 3
Comments: Here is what we had to say on Sunday night, November 13th, as posted in the marketJOURNAL that we provided to our members:
“We’ve been watching GMCR tumble, looking for a possible rebound. With so many in-the-money puts, the huge Friday reversal could give GMCR ammunition for more of a short-term rebound. The two biggest resistance levels are 47.00, then 55.00. For aggressive traders ONLY, consider entry at the current price and again at 41.00 with a closing stop beneath 40.00. Consider selling a portion at 47.00 and the balance at 55.00.”
Update: Max pain was a big issue with GMCR. From our calculation last Sunday night, max pain was approximately $55.00. In addition, we knew there was little overhead resistance if GMCR could clear $47.00, which it did on Tuesday. GMCR immediately gapped higher on Wednesday and hit our $55.00 target by Thursday. Note that the high was $55.18 and GMCR fell back to close at $50.45 on Friday. GMCR was a very good example of how you can use a little market maker knowledge to your advantage as options expiration Friday approaches.
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How do you like your Coffee…Long or Short?
We’ve been keeping an eye on GMCR for a while now. Back in February, we featured it as a Chart of the Day that we liked on the long side because of the strong volume trends and strong MACD. Not only did the technicals prove to be correct, but just days later they announced they were partnering with SBUX and the stock EXPLODED, giving traders a 35% profit in just 9 days!
GMCR came onto our radar again back in October. This time we had it as a short candidate, when it broke below the neckline of a topping head & shoulders pattern on VERY heavy volume. The result? A tidy 30% profit over just 3 days!
As the stock has continued to tumble over the last month, we’ve been watching GMCR, looking for a possible rebound, and we might have nailed it again. We highlighted the stock in our marketJOURNAL last weekend, telling members that with so many in-the-money puts, the huge reversal from last Friday might be just the ammunition GMCR needed for a short-term rebound. As a play for aggressive traders only, we said they could consider entry at the current price (which was around $43 at the time) and again down at $41 (with a closing stop beneath $40). The two biggest resistance levels we mentioned were $47 and $55.
So what happened this time?
The stock exploded right on cue, up 23% in just a few trading days, killing the shorts and making some of our members very happy!
Sometimes you can go to the well too many times and end up giving back all of your gains. But, if you’re patient, and can recognize important patterns, following a specific stock can be lucrative. We don’t brag a lot, but GMCR is a great example of how profitable a trade can be when you’ve done your homework!
Green Mountain Coffee, Inc – GMCR
Date Provided to Members: October 17, 2011
Service: Chart of the Day
Entry (Short): $82.50 (2nd entry at $86.00 never triggered)
Target Price: $63.26 (target was approximately $63.00 based on head & shoulders measurement)
Profit (Loss): +30.41%
Days Held: 3
Comments: Here is what we had to say on Monday night, October 17th, as posted in the Chart of the Day that we provide to our Silver, Gold and Diamond members:
“GMCR is a $12.6 billion consumer discretionary company that engages in the specialty coffee and coffee maker business. GMCR had a very rough day on Monday, gapping lower and then breaking down beneath the neckline of a topping head & shoulders pattern on very heavy volume. The measurement on this breakdown is to $63.00 so there’s still plenty of room for more downside action. We like short entry at the currrent price and again near neckline resistance around $86.00. We’d then keep a fairly tight closing stop near $87.00 with an initial target in the $73.00-$74.00 area. Ultimately, however, a test of gap support closer to $63.00 makes sense given the pattern measurement. Note the last bounce in price on GMCR – the MACD didn’t budge at all higher, a sign that bears were completely in control here. It was confirmed with today’s big loss.”
Update: GMCR did quickly bounce after the head & shoulders breakdown on Monday, but unfortunately it never found its way up to our second entry point at $86.00. The call was perfect, however, as GMCR took another STEEP fall over the next few days, moving all the way down within a quarter of our $63.00 target. That resulted in a 30% profit on that short position in just 3 trading days. The beauty of patterns is that they provide us measurements so we know what our potential reward is on a trade. The measurement rarely plays out as quickly as this one did, but we won’t argue!!!!
If you’d like to begin receiving our Chart of the Day and also benefit from our weekend marketJOURNAL for the week beginning Monday, October 24, 2011, Click Here
Green Mountain Coffee, Inc – GMCR
Date Provided to Members: February 27, 2011
Service: Chart of the Day
Entry Point: $40.92 (average of $41.57 and $40.27 – 20 day EMA)
Original Target: $46.25
Profit (Loss): 35.9%
Days to Reach Target: 9
We discussed the strong volume trends on GMCR as the primary reason to consider the trade. After the pullback to test its 20 day EMA, GMCR began to rise again. On Thursday of last week, GMCR announced they were partnering with Starbucks (SBUX) and GMCR exploded higher at the open Thursday on MASSIVE volume. The profit shown above assumes a sale at the opening bell on Thursday. Our original target of $46.25 was not hit prior to that major gap up. Luck is always a part of trading. Fortunately, luck was on our side this time.
If you’d like to begin receiving our Chart of the Day and also benefit from our weekend setups for the week beginning Monday, March 14, 2011, CLICK HERE.