Fun Fact #45
Companies do stock splits to “signal” to shareholders that their company is doing well. A secondary reason for a stock split is to increase liquidity (more easily converted to cash) by allowing people to purchase shares at lower prices. Let’s say you had $1,000 and wanted to invest in Amazon, but since the share price is currently near $1,600, you wouldn’t be able to buy any Amazon. If Amazon did a 10 to 1 stock split, making the share price $160, you would be able to buy 6 shares with your $1,000!
Although yesterday I was quite bearish because the price action was hinting that we would close red today, since we closed green, I maintain my bullish bias from 5/7. Google hit my “if wrong” target after jumping nearly 3% today.
I’m still skeptical on Apple’s current price action and think it will pullback to 180 soon, but the markets don’t care about what I think.
QQQ broke above a key resistance level at 167 today. This is very bullish, but beware that since everyone looks at the same chart, this could be a classic “bull trap.” Bull traps occur when bulls get baited into buying right as price reverses sharply lower.
Generally, I’ve found that if BABA drops when the market goes up, this is a sign that BABA will drop further. We will likely find out if this is true after tomorrow’s close.
Chipotle (CMG) has been trading in a very tight range in the last 2 weeks. Look for a breakout in either direction either above or below the rectangle that I’ve highlighted in the chart above. You can buy CMG on a break above 430, and short it on a break below 415. Or you can be aggressive and just short it when it hits 430 with a tight stop. I favor a downward breakout with a target of 390.