Like many investors I have a nasty habit of making emotional trades. It’s a weakness that I’m aware of and one that I really, really want to fix.
One such trade occurred on Friday 7th June, where I made a rushed decision on $ATRO. As the market turned from it’s recent correction I saw $ATRO had broken above it’s pivot on Wednesday, held the break on Thursday and that was all that was needed for FOMO to take over!
Needless to say as soon as my trade executed $ATRO turned right around and ran down 2%! So it’s time to take a little look at the chart and work out whether the trade was good or there were signs that I simply overlooked or ignored.
$ATRO Analysis (Aerospace & Defense)
- Group RS Rating of 16 which is up 23% YTD.
- Earnings surprise was +50%.
- The stock met my longer term screen, meaning it had 4 quarters of EPS and Sales growth, as well as meeting a number of other industry and price criteria.
Negatives or positives that were really negatives;
- Of the 48 stocks in the group $ATRO had a composite rating of 10; as such $ATRO was outside the top 20% of stocks in the group.
- $ATRO had an RS rating of 93 putting it 13/48 in the defense & aerospace group; the RS rating was tracking at a very slight incline and slowly flattening.
- March 19 EPS was up 500% in the last quarter; however it wasn’t an all time high, June 18 had a higher EPS. EPS then declined for 2 straight quarters before bouncing back in March 19.
- 2019 EPS was expected to be +44%; but still significantly lower than 2014 and 15.
- March 19 sales were up 16%; this is on the low side and again this wasn’t a new high. June and September 18 sales were higher. Revenue growth was also slowing with the last 3 quarters tracking at 42%, 18% and most recently 16%.
- The stock was breaking above the lip of a 41 week cup with a depth of 41%; there was no obvious handle on the weekly chart. On the daily chart the handle was 6%.
- The breakout occurred on +75% volume; the breakout was no to an all time high, there is a significant amount of overhead resistance tracking back years.
- There were 8 consecutive quarters of stable / increased fund ownership; however fund ownership was only at 260. Only 19 A+ funds have a position.
- The stock didn’t meet my mid or short term growth screens and also failed to meet the William O’Neil screen, missing on 2 of 9 criteria (77%).
Notes can be found on the daily and weekly charts below. The weekly tells a more positive story however the eventual failure of the breakout vs the upper trend line is a real concern and probably enough of a reason to liquidate the position.
The daily chart is scrappy and there are enough warning signs to pass.