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NTRI- Nutrisystem Inc

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After a string of triple digit earnings for several quarter, NTRI is down around 10 points today. This is how many earnings driven trend end. At some stage the good earning is already priced in and market starts anticipating slowdown. NTRI will soon be a history.
If you play the earning strategy, always look for stocks which are just starting out in their earning super performance. As the trend becomes older the risk increases. Investors Business Daily says never to buy late stage bases.

Most successful stocks build a number of bases as they pause on their way to larger gains. The first time a stock forms a solid base, few people are even aware of the company, so most miss this first-stage base. More people notice the company during it's second base after the stock moves up 20 to 30% from the first stage base breakout point. By the time third- or fourth-stage bases have formed, many more investors have belatedly "discovered" the stock. This, however, is when the stock is more likely to disappoint you. In about 80% of fourth-stage bases, the stock fails to make further price increases.

Update:
More on late stages buying by IBD in today's edition. You can see the link in the right sidebar under the headline 'Sell What You See And Not What You Think'

When a stock makes a new high off a fourth-stage base, it's too obvious to the market. When everyone is optimistic, it's usually too late to join the action. By this time, all the buyers have gotten on board. There aren't enough new ones to push the price higher.
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1 comment:

Pradeep Bonde said...

I know one thing for sure, HANS will trade in single digit sometime in future. History of all rapid growing stocks is full off such stocks.
The float on this stock has increased dramatically and for some strange reason it is not optionable.It might have some more juice in it but its dramatic growth phase might be over. A single miss on earning and this stock will be history. It might enter an extended range or get in to a slow uptrend. But at the end of day it is selling just sugar water. Snaples was one such wonder which traded very high before falling down.