__________________________

My bread and butter is charting high probability breakout plays in healthy markets. However, broadly trending markets also offer enticing “support buys,” for traders who can buy a stock on a pullback with a disciplined exit strategy in case the bid fails to materialize. I prefer to wait for signs of strength and at least stabilization, rather than trying to catch the proverbial falling knife.

With a low float and a heavy short position, as well as earnings out of the way, BJ’s Restaurants has recently come down its 200 day moving average in a virtual straight line. The daily chart printed a hammer-like candle with heavy selling volume on Friday, followed by an impressive intraday reversal higher on Monday. This tends to be a sign of selling exhaustion. BJ’s looks to be stabilizing on a key reference point and I think it is a good idea for a support buy. I would add, though, that a clear stop-loss is crucial here, as failed support can get ugly in a hurry. A stop no lower than $47 makes sense.

__________________________