Would you like a piece of PI(I)?

Gator's Chart of the Day: PII

Polaris Industries, Inc. reported earnings on July 24th before the market opened.  You can see the tall red volume bar that was indicative of the gap up and trade down for the remainder of the session.  Including the shadows at the top and bottom that candle nearly touches the upper and lower Bollinger bands.  They got tighter as the stock consolidated for the month of August and now we see the good ol' breakout from a volatility squeeze pattern.

A quick check of the fundamentals shows a strong balance sheet with little debt and a dividend yielding just under 2%.  Analysts have a target price of 91.60.  The short interest is 6.4% and it takes just over 5 days average trading to cover.

The Trade
Phase 1 of the pattern is the breakout and move higher.  This is in progress.  Phase 2 is the pullback to test the breakout and Phase 3 is the move higher following the successful test.  That's the playbook.

With the market fading into the close on Monday I would look to take a small bite on a positive open or if the stock opens down I would look for a bounce.  It could be we see Phase 2 complete before we see the bounce so patience may be required.  Once the initial position is established the stop would be back in congestion.  Pay attention to where the 20 and 50 day simple moving averages are when selecting the precise level for that stop.  My target price agrees with the analysts; 91.60.  That means it will be in new all-time high territory so I would expect to exit the trade with tight trailing stops and let the stock tell me when it's time to leave.