Hi Marty, I just joined because I’ve followed you on Twitter. My question is on ELF. I see it’s on your holdings list from a few months ago and was wondering why you didn’t cut it when it fell from around $60 to $50 when lots of people ran for the hills on that drop. Just curious. Thanks, Kim.
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ELF Timing in the market is everything. ELF has been trending well since it broke out at $34 on August 4, 2022 at $36.00. If you bought the stock one that day then you can afford to sit through a pullback.
It had three days of selling on January 9-11 where it sold off 4% 8% and 4%. The stock sliced its 50sma with volume and that is a selling signal for sure.
Personally, I was not holding that stock when it sold off. But, if I was holding ELF it would have been sold when it sliced it 5osma. Another sell rule it may have violated is the 5% loss rule. It all depends on the entry price.
If you bought the breakout on August 4, 2022 at $36.00 and sold as it sliced its 50sma at $53.05 then you made a great trade. We expect growth stocks to form bases after 20%-30% run and ELF gave us much more than that.Recently, I have seen quite a few stocks dipping below their 50sma and then immediately reversing and ripping right back through that level. The "undercut and rally" pattern can be seen in strong stocks like FSLR. We saw seven consecutive days of selling in early December of 2022. We can see the double bottom in FSLR where it exploded off the lows after the shakeout. This stock made new highs last week. Will ELF undercut and rally like FSLR? I am watching to see how it performs this week. I will keep ELF on our leaders list for another week at least, and see if it will rally back through its 50sma. Fundamentally it is an expensive stock trading at five times sales. But, Amazon was "expensive" for 20 years and investors did OK with that stock. I am not saying ELF is another Amazon. But, most growth stocks are considered "expensive and "high risk."
Thank you for your question.