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Jun 10

Entering Long Ambarella ($AMBA)

We’ve been very close to getting this signal several times. It’s often reversed after a fresh leg higher requiring it to set up again for us, but with today’s move we have what we need and we’ll enter at Tuesday’s open.

This has been a great performer already but don’t let that put you off. Whenever we’re looking at a stock that’s had a meteoric rise we have to be careful not to concentrate too much on the price scale or the percentage gains so as to not have it influence us into thinking its ‘gone up too much’ or that ‘you’ve missed it.’ To conclude that would suppose that you can predict just where you are in the trend, how far it will go, or what is too high. You can’t.

We follow trends, we don’t have to justify them. So many times we’ve seen high growth momentum names like this, that few analysts have a handle on, continue to do their own thing and defy all expectations.

Amabarella ($AMBA)

$AMBA made an all time high close today but you wouldn’t know it on first glance at the chart. The price action has been quite volatile, gapping in either direction with many reversals, rarely closing near the session highs.

AlphaCapture

The key throughout though is that despite the volatility, it has maintained its trend higher without a significant close below its most immediate moving average levels, near where $15.66 could act as a reasonable stop. In addition, the volume has been a big tell, recording several accumulation days, rising on increased volume.

Whenever there’s a lot of noise on a chart, I find it’s often a useful exercise to look at price data in its cleanest form to see if it tells the same story. I typically like the visual representation of a day’s range with candles, but look at $AMBA here as a simple closing line chart,¬†and the significance of today’s move becomes much clearer.

AlphaCapture

 

 

 

 

2 comments

  1. Marcy T. Coffey

    One disadvantage of the line chart is that it does not help you evaluate how wide the daily price range is. By looking at the closing price of a stock it may appear that it is in a steady trend, but during the day the stock could swing wildly up and down in price.

    1. Jon Boorman

      I agree. That’s why I usually look at candlestick charts so I can get a sense of the typical range and volatility. My point was sometimes when a stock is volatile it is possible to miss the overall trend of closing prices, briefly switching to a line chart helps with that.

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