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| Gator's Chart of the Day: ADSK |
Autodesk Inc reported earnings last week and the market didn't take too kindly to what the company had to say. In fact it resulted in a good ol' puke fest on incredibly high volume. The question is ... are they done? It looks like they could be and buyers are picking up a value. This is a tech stock with a forward P/E under 14, no debt and very attractive margins. You can tell by the "open" candle printed on Friday that the stock opened very near the low of the day and traded higher. I think this warrants a closer look at Monday's trading.
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| ADSK 5 Minute Chart (8/27) |
The stock opened higher but immediately reversed lower and traded down to the low of the day by 9:50. From there it rebounded and traded in a tight range for the middle part of the day and then closed near the high with strong volume in the last 10 minutes. I think the selling is done.
The Trade
My thesis is that 30 is now solid support and if the price falls below that by more than a few pennies for more than a few minutes then I'm wrong and I'm gone. So I would look to take a 1/2 position near the open as long as it's above 30 and my stop would be around 29.85. Assuming the stock moves up I would buy the other 1/2 position when it clears 31.20 (Friday's high) and place a stop around 30.90 for the second buy. The minimum target price is the 50 day simple moving average but I would not sell all at that level. I would be inclined to take a little off the table and put a trailing stop on the rest and see if the stock can make the 200 day mark. The risk should be about 2.2% and the reward at the 200 day would be about 16%.
