Blackstone (NYSE:BX) is a stock that has been on my radar for over a month. You might look at the chart and say, “why is that? It has been rising since the October lows in the market.” And that is a true statement. It has moved higher in a series of stair step moves. It is the pullbacks that make stocks like this interesting. Will they hold and reverse? Is the pullback a good place to enter or will it just continue lower? Hint: CEO, Stephen Scwharzman is standing at the ready to welcome you back.
The chart above shows when it first re-entered the radar to start the week of May 4th, 2015. Then it had been pulling back after a move higher from the break of resistance at 39. It had just retouched the 20 day SMA and then reversed higher. Monday morning actually gapped over our entry trigger and we passed to reassess. That is trading.
It drifted for a week and we got distracted. Isn’t that always the time a stock moves up? It ran higher until breaking the top of the Bollinger Bands® and then started back lower again. That was time to start watching for an entry again. I noted it was not a time to chase until at least touching the 20 day SMA again.
That thinking was correct, but it omitted one key point I tell other traders: don’t buy a falling stock until it is done falling. Over the past year, the 20 day SMA or lower Bollinger Band had been good buy points. This time, it blew through the 20 day SMA and ran to the Lower Bollinger Band. From there, it pushed it lower and kept going until it fell below the 50 day SMA and printed a Hammer reversal candle Tuesday.
With Wednesday’s confirmation higher, it was time to pounce. Now we own the stock at a good discount to a week ago against a solid stop level at the Hammer low. With the RSI bouncing higher and the MACD slowing its fall, turning sideways, there is good promise for some upside from here. Next step, we will look to sell covered calls on any stall around the prior high at 44.
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