The round number theory is a strategy we like to employ here at ChartSmarter. Very simply stocks seem to stall and find support at the round figures. There are some that are more important than others to me like 20, 50 and 100, but you will frequently find stocks exhibit certain behaviors around all of them. VMW for one bounced precisely off the round 80 figure on 10/22 after falling 7.1% after its last earnings report and has since traded up 6 1/2 handles. There are many examples and lets look at 3 that were recently highlighted in our Game Plans.
In our Wednesday 10/15 Game Plan we looked at Vertex Pharmaceuticals Inc (NASDAQ:VRTX). VRTX is a pharma play now up 57% YTD and 91% over the last one year period. Notice how the stock grappled with resistance at the round par level in early July before smashing through on 9/19 jumping 6.6% on huge trade. We recommended a buy at the round 100 number on 10/15 and to stress the importance of CLOSING prices notice how it traded as low as 96.43 before recovering almost 5 handles to finish above 100. VRTX is now 16 handles HIGHER from the highlighted entry.
Stocks that can be bought at the round numbers are VRTX. VRTX we last profiled in our Thursday 9/18 Game Plan with a 96.50 cup with handle trigger that was taken out on that session and for good measure it rose an additional 6.6% the following day on enormous trade, taking out the round par figure for the first time ever. It went on to gain almost 10% the following week. The stock has gained 40% YTD and 47% over the last one year period. VRTX is off a quick 11% from its all time high and with the volatility recently in the group, look at GILD today, this name could trade back to par in a heart beat and lets take advantage their with a long position.
Trigger VRTX 100. Stop 95.30.
In our Tuesday 11/4 Game Plan we looked at EA. EA is a best of breed gaming play up a very smart 80% in 2014. On 10/28 the stock gapped up 3.8% after a well received earnings report and pierced the round 40 handle for the first time in 6 years but was unable to CLOSE above it. The following session it closed just beneath it before finally finishing above 40 on Halloween. EA has held that number ever since and it looks like firm support now. Further the weekly chart displays very tight, bullish action the last 2 1/2 weeks. We recommended a buy at 40.25 and it is now UP more than 2% above that pivot and a move above 41.50 can be added to.
Stocks that can be bought at the round numbers are Electronic Arts Inc (NASDAQ:EA). EA is a consumer play that is higher by 79% YTD and by 60% over the last one year period. Last week EA reported earnings on Wednesday and it rose 3.8%, taking out a 38.40 double bottom trigger in the process. In fact it lost ground just once in 2014 after releasing numbers on 7/23 down 6.2%. Other than that it jumped 21 and 1.6% on 5/7 and 1/29. Notice the precise support at the 200 day SMA on 10/15 and the nice finish that session at highs for the day. The stock recently took out the round 40 handle for the first time since the fall of 2008 on Friday. Lets look to enter on a slight pullback toward that figure at 40.25.
Trigger EA 40.25. Stop 38.90.
In our Thursday 10/30 Game Plan we looked at Carbo Ceramics Inc (NYSE:CRR). CRR is an idea that is still in play on the short side. The stock has made pit stops at 50 point intervals since having issues with the round 150 number in June and July. The 100 level was support in August and September, and now the 50 figure is holding as tenuous support. A drop below the 50 number could be hazardous for this name that is more than 67% off its recent 52 week high made just 4 1/2 months ago.
Stocks to be considered shorting opportunities are CRR. CRR is a member of the energy equipment group and it has been decimated more than actual group, which is hard to do. It is 66%, 2/3rds of its value not a typo, off its recent 52 week highs. Notice how the round numbers come into play with CRR as the 150 handle was resistance in July, 100 was support between the beginning of August through mid September, and now 50 is support for the last couple weeks. This stock REPORTS tomorrow and if it opens higher and then reverses below the round 50 number take a short, do not play it if it gaps below that round number. In that scenario you can try a short if it reverses higher into the 50 handle. Those round numbers are something, huh?
Trigger CRR 49.75. Buy stop 53.