Unusual Pattern of the Day: Stamps.com (STMP)
Shares of Stamps.com (STMP) have been in a general downtrend since August. While there have been some strong counter-rallies along the way, one emerging pattern suggests that shares will continue to decline.
That pattern is the death cross. It occurs when a stock’s 50-day moving average drops under the 200-day moving average. A death cross is a medium-term pattern suggesting weakness in the months ahead.
Even with the downtrend over the past few months, shares of the company are still up 148 percent over the past year. The stock has been performing well operationally in the past year as well, which helps explain why the stock has such powerful rallies amidst its broader decline.
- America’s Economy Could Be In For A Rude Awakening
If you’re worried about why stocks are surging while millions of Americans are out of work and commercial bankruptcies are skyrocketing, I strongly urge you to listen to this message.
Action to take: Shares have started down again in recent weeks after a mini-rally. Looking at the stock’s chart, the most likely point where the next big reversal is likely is down in the $180 range. With an expected 10 percent pullback likely, traders can target the May 2021 $180 puts.
Last trading at $19.80, a move back to the $180 range should occur well before the option nears expiration. Traders should look to take profits once shares hit the strike price, given the stock’s propensity for strong rallies higher. And should shares get near the $180 strike price, traders should be on the lookout for the next swing higher in shares.