Our first downside objectives in the major indices have been met, so we’re back on the lookout for long ideas.
One stock that has caught our attention is IndoStar Capital Finance Ltd.
We first visited the stock back in late December when it confirmed a failed breakdown and bullish momentum divergence, leading to a squeeze to the upside that pushed it back above support at 270. Despite weakness in the broader market, this stock has consolidated its gains through time rather than a correction through price.
Click on chart to enlarge view.
Now, with volatility compressing over the last few weeks, the stock could be setting up for an explosive move…in either direction.
Given the preceding price action and that momentum is in a bullish regime, we’re betting that it’s to the upside. As long as the stock is above 270, we want to be long with an upside objective near 430.
With that said, if prices resolve this consolidation to the downside instead, then you can make an argument for being short the stock with a target near 180. That’s not the bet we’re making, but want to remain open-minded to both possibilities.
From compression comes expansion, and that’s what we’re betting on in IndoStar Capital Finance. Once the stock decides which way it’s going to expand, we want to get along for the ride with our risk defined at 270.
Thanks for reading and let us know if you have any questions!