This looks like the beginning of a big run-up for this oil stock.
Yesterday, this stock broke out of a 3-month consolidation on 3x its average volume.
Here’s how to profit from it without paying up.
In March, Cactus Inc. (WHD) sold more shares to investors, which can often depress the price of the stock.
However, WHD is ranked #1 in its industry group (Oil & Gas – Machinery/Equip) by IBD. So it’s not surprising that investors scooped up the newly issued shares quickly and are now pushing the stock even higher.
With the uncertainty of how the additional shares would impact the stock price out of the way, the stock looks like it could go much higher.
Breakouts from big consolidations like the one in WHD are great candidates for pullback trades.
Therefore, rather than pay up for the breakout, be patient.
Here’s how to play it.
The daily chart below shows the big breakout, but if you can look at the intra-day action, you’ll find the big volume came in around the $38.50 price level.
The high of the consolidation was around $38.70, and it closed at $39.45
It’s likely that the stock will move higher before it moves lower, and that would be a good sign.
But it’s not at all-time highs, so there is a good chance that there will be a retest of the breakout level.
As a result, the buy point should be between $38.70 and $38.00.
There is good support at down to $37, so the stop should be under that level.
The reason to avoid buying under $38 is that it shouldn’t trade under that level if the breakout is good, but it’s not enough of a reason to sell a position.
Rick Nartarian, Chief Investment Officer
The American Investor Daily