After closing many winners since we launched in December 2013, we do have some positions that are down. We have no worries about them, though… and are continuing to hold all open positions.
We’ve been watching Lumber Liquidators (LL) closely after watching it plunge from $75 to $55. We believe the sell off is overdone even with broad weakness in the building sector. RSI is again deep in the red zone where it typically bounces. MACD has also over-extended itself to the downside in desperate need of mean reversion. It’s also well under its lower Bollinger Band. Williams % Range is on the floor. DMI has spiked too much.
The put-call ratio on LL sits just above 2.4. That tells us – at these levels – the fear is beginning to reach unsustainable levels. Extreme negativity looks to have been priced in. At some point, shares of LL need to move higher to even everything out. While there is risk here, we believe the reward outweighs it, near-term. We’re simply looking to jump in and out quickly.
We’re recommending that you buy to open the LL November 2014 60 calls up to $5.
We’ll talk again soon. If you have any questions, comments, or have a chart you want us to take a look at for potential buy interest, please let us know. We’re happy to help.