Based on our longer term signals this stock has never been in a poor position. However when I initially built the portfolio the short term setup had some concerning looking issues and the risk/reward was not in our favor. Over the past 2 months though it has held its massive gains from the March lows very well and is now breaking above the consolidation zone.
This trade doesn't come without its wrinkles however. DDD will report its earnings for the quarter tomorrow morning before the market open. This "event risk" will no doubt create some volatility in the shares and could very well end our trade right away. If the market doesn't like what it hears in their report, the shares could sell off pretty hard and we would be stopped out. But that is part of the market, you take calculated risk and get out quickly if you are wrong.
We are playing the breakout of this congestion area which has formed a bullish Cup/Handle pattern and projects a very substantial gain from current levels. Our risk will be limited to a failure of the low at $45. If that level is violated we will need to move to the sidelines and reevaluate our plans for this stock going forward. I trade what price is telling me, not what "might" happen in the future. Right now price is saying that this stock wants to continue higher from current levels and we have a very defined risk/reward setup that is advantageous for our portfolio going forward.
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