ALVR (Long)...

Here's a change of pace. I'm throwing out a long pick over the weekend here, namely ALVR. This one's thinner than I typically go for, but it's also a stock I've been following for a few years now, so I'm comfortable with how it trades. You'll note the two massive gap-ups from June (orange arrow). Those were on news that ALVR got a big new contract. So, what we see here is a stock that moved huge on news and has been consolidating for the past month or so. ALVR doesn't report earnings again until 29 July before the open.

I'm thinking the 200-day EMA (which corresponds well with the open from the second gap-up day) will act as support (dashed black line). However, if that is not the case, then I think the stock will fall to fill that second gap-up. That's about another 10% drop or so, which is more than I'd want to sit through (plus if it fails to hold that second gap-up, it could even fall back far enough to fill that first gap-up, which would be even more painful).

Here's the way I plan to play this one. I'm looking to buy a little bit here around present levels, but I'm going to leave plenty of room to add. I plan to use Thursday's low around $3.80 as my stop loss because if it falls that low, it's likely to fill that second gap-up and I don't want to hang around for that. Assuming it holds support, I would look to add a bit more because ALVR is providing us a setup called a multi-day pullback. The way to play this setup is to buy your starter with the stop and be ready to add once we see a move above the previous day's high with some volume (the dashed purple line represents this).

If you really think about it, we're looking to play a similar, but less-pronounced, setup to this in the other direction with BNI and MDR. In those cases, it's a high-volume breakdown followed by a low-volume rally.



Position: none