What if I told you that we can potentially make 50% on a trade with minimal risk. What if I also told you that it’s showing tremendous relative strength and positive momentum? Do I have your attention? You’d certainly have mine!
The stock we’re looking at today is the New York Times $NYT. It’s is a Consumer Cyclical and among the Publishing Industry stocks. The first thing that catches my attention is the massive bottom on the relative strength chart. It reminds me an awful lot of Technology in the Summer of 2016. Technology has consistently almost doubled the performance of the S&P500 since then.
We want to be buying smiley faces, not frowny faces:
Now let’s look at the price itself. This is $NYT sitting right at the 61.8% retracement of the entire 2002-2009 collapse. This is a key level of reference that we will use for risk management purposes. You can learn more about how we calculate these numbers here.
Here is a closer look at this. We’re right at our key infliction point:
I like to remind people that this is an art, not a science. We want to look at things from different perspectives. Zooming back out, one can argue that the original resistance in $NYT was in late 1999 under $50 and the 2002 move was a whipsaw. In this case, the recent consolidation in $NYT is taking place above support, rather than below resistance:
In either case, from an execution standpoint, we only want to be long if we’re above this resistance since March. You can call it $35 or you can call it $34.50 or anything in between. Here’s how I approach that. If we’re below this overhead supply, then there is both downside price risk and opportunity cost. We only want to be involved if the market has proven that the demand at these prices has absorbed that supply. This is the zoomed in chart:
The target is back up towards those all-time highs. That gives us close to 5o% of upside. Momentum is in a bullish regime. The Relative Strength is there. We’re pressing up against 14-year highs. If the U.S. Stock Market is gonna go, this one is likely to shine.
I like it.