Market Lab Report - Buyable Gap-up Review for Week of 11/2-11/6

Published : November 8 2015 at 16:48 ET

Trading Journal Notes from Dr. K and Gil regarding this past week's buyable gap-up reports:


Facebook (FB) 11/5

FB gapped up on Thursday after a favorable earnings report on Wednesday after the close. The buyable gap-up set an intraday low at 107.95, but this was quickly breached on Friday with a maximum undercutting of the gap up day's low of -1.9%. In context with the overall chart, one could still have kept their position. Further, supercap stocks often will undercut their gap up days before moving higher. In other words, backing-and-filling in supercaps is often more common than in stocks that have lower market caps as supercaps tend to trade more efficiently as many institutional funds are on board.

If we consider this carefully, FB was perhaps a bit extended since we reported on its pocket pivot back on October 15th at a closing price of 94.90. I would not write FB off if this market continues higher, because it is still a big-stock leader in this market and would likely only top if the general market were to split wide open here. Since that doesn't appear likely, as last in terms of the current, real-time market evidence, I would watch for FB to perhaps test the 10-day line, or roughly -2% to -2.6% below the low of the gap up day depending on what day the price hits the 10-day line, as volume dries up as an opportunistic entry on a pullback.

Chasing obvious strength in this market has not necessarily paid off, and it would make sense that a constructive pause in FB would be good for the stock as well as presenting a possible lower-risk entry near the 10-day line.


GoDaddy (GDDY) 11/5

I think you can expect GDDY to be volatile here on this latest post-earnings buyable gap-up. The move has taken the stock right up to its prior June highs in a big cup formation. Again, as with most displays of strength in this market, I would prefer to enter the stock on a pullback to the 29.05 intraday low of the BGU day. As well, with the stock up at the prior post-IPO June highs, it would not be unusual for the stock to form some sort of handle or flag formation here. In this case, the stock might settle down with volume drying up, setting up a reasonably low-risk buy point near the 10-day line as it continues to rise or the 29.05 BGU intraday low.


This information is provided by Virtue of Selfish Investing, LLC (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2016 Virtue of Selfish Investing, LLC. All rights reserved.