Trading stocks well is no simple feat to pull off.
There are no obvious trades – if there was one, everybody would trade it, right? It can’t be this easy!
In the market, there are no simple answers – hence, any good idea is usually a combination of multiple factors that combine into a thesis and a conviction.
I pride myself to say that RagingBull traders excel at connecting those dots, those small pieces of data here and there, and finding opportunities where others miss out.
A very recent trade by our very own Ben Sturgill is the last example of such an out-of-the-box way of thinking.
Story Behind a Stock
Peter Lynch, one of the greatest hedge fund managers of all time once said:
“Liking a store, a product, or a restaurant is a good reason to get interested in a company…”
And if you’re about to click the buy button on a stock of some product you recently liked, hold on, Peter Lynch continued:
“Never invest in any company before you’ve done the homework on the company’s earnings prospects, financial condition, competitive position, plans for expansion, and so forth”
But the moral of the story is simple – if you really like a product or see a very busy store, chances are the company behind it is doing quite well! So, go ahead, and do some due diligence on the shares!
That was exactly Ben Sturgill’s thinking after his recent trip to a local Home Depot (HD).
Ben went in looking to buy a 6/3 wire for his new house… albeit, he didn’t expect to pay over $500 for it!
He was further amazed to see that the store was very busy, despite the seemingly pricey goods!
Ben’s first thought was, and I’m quoting here: “WOW. They are making money.”
So having shelled out a bunch of cash for some wiring, he drove home… and took it to the charts!
HD Bounce Setup
As traders, we generally don’t base our setups on fundamental factors…
But, if there is one playing in your favor – why not make use of it?!
Both the big picture trend of HD’s stock, as well as Ben’s personal in-store experience made one thing evident – the stock is a great buy!
And since we were (and still are) in the middle of a market meltdown – HD may be a great dip buy candidate – so Ben thought!
Now, he just needed a short-term trading setup, where the risk/reward would be skewed far into his favor.
Ben noted the incredible strength in the names last Friday:
So he put the stock on watch:
And once he got what he asked for – Ben broadcasted live in The Workshop his entries into Feb 18th 380 Calls between $3.03 and $3.10 per contract.
I’ll let you judge if his idea was a solid one, but in the days that followed, HD went nothing but up:
Hence, Ben, took some exits:
And:
Getting such trade insights makes the $500+ purchase in HD store all worth it! And he still kept the wire!
