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Weibo is Ready for Continuation
Weibo is a High Probability Setup that popped up on the 30-30-30 scan this weekend. This scan looks for companies with strong fundamentals, that have seen EPS for the quarter increase greater than 30 percent, EPS for the year accelerate to greater than 30 percent and sales for the year surpassing 30 percent. Additionally, we look for companies larger than 2 billion in market cap and daily volume exceeding 300,000 shares. Finally, we sort the list to focus only on stocks that are trading above the 20sma. The resulting list is at the bottom of this post for further study and consideration.
Weibo was featured in IBD this weekend as well, validating our thoughts for a potential trade this week.
“Investors should be looking for leading stocks breaking out of bullish bases in volume, with their relative strength lines — which track stocks’ performance vs. the S&P 500 index — leading or confirming the breakout. Weibo (WB), Atlassian (TEAM), Match Group (MTCH), Take-Two Software Interactive (TTWO) and Align Technology (ALGN) are all highly rated stocks near buy points in proper bases, with RS lines that are right at or reasonably close to at least short-term highs.” – Courtesy Investors Business Daily
Weibo – WB Presents a High Probability Setup
A breakout would trigger a long position in WB, as the cup and handle pattern signals continuation. The handle forms as the remaining bearish traders throw in the towel and supply transitions to demand. A breakout occurs most often accompanied by above average volume. WB is currently trading at 52-week highs, which also means there is no overhead supply above this level. Said another way, there is no one (bag holders) left to sell as price rises. MACD is above its signal line, so bulls are firmly in control of momentum.
Note the MM (measured move) is approximately 25 points, which would make WB a $150 dollar stock in the coming months.
Weibo Corporation operates as a social media platform for people to create, distribute, and discover Chinese-language content. It operates through two segments, Advertising and Marketing Services, and Other Services. In short, this is the Chinese equivalent of Facebook, with more bells and whistles.
Weibo WB – IV Rank
Consider February calls as an alternative trade. With IV Rank at 17%, it remains more advantageous to buy options. Once above 50% the balance shifts to option premium sellers; covered calls, bull put spreads, etc. for a credit (income trade).
Sales and earnings are what drives stock price. Look for pullbacks to support or consolidation like WB, prior to breakout for the best results. The list is ranked by SCTR score, a similar relative strength measure as the IBD ranking system.
If you are bullish, always consider stocks that are trading above the 9/20ema (20sma on the scan) as the probability of continuation is much greater.
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