Hi Marty. Please dig in a little into DLO. I actually took a half position today after it bounced off the 50ma. I like the preannouncement of earnings, but the stock is down because of the offering I guess. Anyways, thought it could be an opportunity to add to my position tomorrow and make it full. It is good to read that you might also think its an opportunity. Keep up posted in tomorrow's report what you think.
Thanks,
Eric
Eric,
I think you will be fine holding DLO. If you are a longer-term investor it may be wise to allow the dust to settle a bit though. The focus will be on the secondary offering which is not a real big deal as the company has 111 million shares outstanding. From what I can ascertain the share are being offered to the underwriters. But, I do not want to get lost in the weeds here. For me, the big takeaway is their triple-digit revenue growth, and huge EBITDA margins. There are not many companies growing like that. We just need to watch price and volume in the coming days.
However, in the short term the focus will be one the secondary offering, and it will open below its 50sma which will be around $60 today. But, the stock has shown that it can rally through that keep technical level, and there is no reason why it will not do that once again. That is where the opportunity lies. But, you must be comfortable buy a stock below its 50sma. Many growth traders are not comfortable doing that and wait until the stock proves itself. The following is the most important part of their news announced yesterday.
The stock recently made a bottom at $49.66 on October 12, and that is a "line in the sand" as the stock is to be ignored if it makes lower lows. That would be pretty extreme for the stock to make new lows, and it is to be avoided if that happens. The stock printed an inverted hammer on October 11 and my best guess is the lows hold here.
The best course of action is to wait and let things play out. Some people get emotional and just sell the stock because they did a secondary offering. But, it is quite common for young companies to use their stock to fuel further growth. The weekly chart shows a bullish engulfing candle and that usually plays well for the longer-term investor. My expectations for this stock is that it undercuts the 50sma again, and then rallies back through it after the emotions from the offering have dissipated. One thing to look for is the price of the offering and the closing date. That has not been announced yet.
It is important to know yourself here, and what type of Investor/Trader you are. If you have the ability to ignore a one or two day loss then you should be fine here. If daily losses bother you then it may be time to sell and move on. Everyone needs to know what type of investor/trader they are and that tales some time to learn. Being intellectually honest with ourselves is challenging at times.
Good luck Eric!
Regards,
Marty
