My hopes and prayers are that Hurricane Florence does not cause much damage. Still, investors need to protect their portfolios.
And there might even be trading opportunities if share prices get out of whack.
As a result, consider the following three scenarios:
• Damage is less than expected.
• Damage is in line with expectations.
• Damage is worse than expected.
Let’s explore with the help of a chart.
Chart
Please click here for the annotated chart of Lowe’s LOW stock.
Please note the following:
• Lowe’s is essentially a large hardware store. It is already benefiting as people rush to buy supplies to deal with the hurricane. If the damage is severe, the stock may gap open on Monday. On the other hand, if the damage is less than expected, the stock may gap down on Monday.
• The chart shows the buy signal The Arora Report gave recently in anticipation of the hurricane for a trade-around position. The position is already profitable.
• A trade-around position is a short-term position around a long-term core position.
• The long-term core position was built at an average price of $81.85. The chart shows Arora buying for the long-term position. The long-term position was built using the evergreen strategy of buying good companies when their stock prices drop due to temporary factors. As the temporary factors go away, the stocks often not only recover but go to new highs. This is exactly what has happened with our spot-on call on Lowe’s.
• The chart shows the volume is low. This indicates there is no conviction. For this reason, the trade-around position is a very short-term trading position.
• The relative strength index (RSI) on the chart shows divergence. In plain English, this means that RSI is falling as the stock price goes higher. This is a negative.
• The chart shows a gap up on good earnings and projections….Read more at MarketWatch.
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