While the 176.61 percent YTD figure on SSTK is a cause for concern, the stock's technical chart on a daily basis presents a favorable entry opportunity and enough upside to take a shot on this high-flyer. SSTK doesn't report earnings until Nov. 14, so there is no reason to expect heightened volatility until then, despite the weekly chart being extended. SSTK went through a modest consolidation phase from mid-July through early September, but has since made a strong push to the upside, breaking through old resistance and establishing another leg higher on its long-term up-trend.
SSTK recently hit highs of $76.07 at the open on Friday. While this is some immediate upside potential, the stock seems to be forming some resistance right at $76 (see: early October, last Friday), struggling with that price this month. Considering strong intraday action this afternoon or a continuation of buying activity into tomorrow could easily have SSTK testing this resistance, picking up the stock at current prices and playing for a technical breakout in the short-term seems like a relatively high-probability bet.
Given that SSTK is pretty much parabolic on a weekly basis, it is probably best to give the stock a tight leash with a stop at $70.02 while playing for a short-term breakout. Internet Software & Services stocks have been consistently great this year, so any opportunity to enter should be viewed as a good opportunity.
When to Consider Entering the Trade:
At the current price (~$73.32).
When to Consider Exiting the Trade:
At a close below $70.02 (Breakdown) / A close above $76.07 (Profit-Taking)
Disclosure: At the time of publication the editor and affiliated companies own the following positions: None
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Mr. David Moenning is a full-time professional money manager and is the President and Chief Investment Strategist at Heritage Capital Management. He focuses on stock market risk management, stock analysis, stock trading, market news and research. Click here to claim a free copy of Dave's Special Report on changes in the current market.