Back when the heaily-shorted, high beta retail play BONT was trading at $9.65, I wrote the following premium blog post for 12631 members on August 29th of this year:
This is what you want to see on a bearish to bullish reversal over the course of many months. Look at retail play BONT‘s moving average on the left side of the zoomed-out daily chart below–Downsloping and indicative of the bear. However, the chart recently saw price curve back up along with those moving averages.
Beyond that, we have just witnessed a classic cup and handle bullish breakout on strong buying volume. BONT is a very heavily-shorted name with a low float, meaning it is prone to vicious short squeezes higher. However, you must be sure you are on the right side of the trade, or the bevy of shorts will be pressing you lower.
After this breakout, I would not chase the stock here. However, I would now be watching it very closely to look for a mild pullback and major higher low before turning back up as an entry.
Because I elected not to chase the breakout in BONT, I missed out on a massive move higher in a virtual straight line up to $14.99. At times, I will miss breakouts even when I identify the pattern–It is part of the game, and certainly part of any disciplined trader’s experience in the market. You have a certain zen about it.
That said, there may very well be a good secondary entry point coming up. The stock is down over 10% right now, and though that seems scary recall we are talking about a very high beta, shorted stock. The overall breakout remains clearly intact, the moving averages on the daily are rising and lined up properly, and the volume pattern is still in the bulls’ favor. Look at the looming test of the rising 20 day moving average to see if the stock can stabilize and prepare for another potential move higher continuing from this breakout.
Despite the selling today, shorts are still broadly on the wrong side of the BONT trade.
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