Hope your Tuesday’s going well StockBandits!
You’re used to seeing short-term trade ideas presented here, whether they are day trades or swing trades, but periodically I do put on positions which are intended to last longer. I typically don’t involve them in my main trading account, and instead leave them for my IRA. These position trades are generally a bit slower-moving, meaning I don’t expect to monitor them real closely and they are likely to last at least several weeks. I’ll be presenting these here periodically as they emerge.
Since these plays are longer-term positions and not ‘trades’ as typically defined here, they are not posted to the Hit List. These are additional, longer-term ideas which are shared for your benefit. I don’t at all mind updating the status of them or conversing (in the comments below) about how they’re behaving, but they will not get my daily attention and will not be updated regularly as such.
Now for the play…
Fads come and go, but some things are cool enough to outlive the bandwagon effect. One of those is the ongoing enthusiasm surrounding Harley Davidson motorcycles.
When it comes to motorcycles, on one end of the spectrum are there are the lightweight import ‘crotch-rocket’ bikes with incredible speed, and on the other end are the loud, heavy, chromed-out Harley Davidson street bikes for the leather-clad, bandana-and-shades wearing crowd. The Harley Owners Group (HOG) is a huge association of Harley enthusiasts, gathering daily all over the country. It’s a growing group, so much so that a few years ago the company changed its ticker symbol to HOG from the former HDI.
For some, the Harley lifestyle is a way of life they embrace 24/7. For others, it’s a separate persona they shift to after work or on the weekends, donning their chaps and black sleeveless shirts as they hit the streets to meet up with their biker brethren to share stories, make noise, and of course show off their rides. It brings people from all walks of life together, with the hobby transcending social status, race, or age. No matter who they are or where they’re from, they all love it, and they’re committed to the brand.
As for the stock itself, the past year has shown some real promise as well, tacking on 22% despite the market weakness which impacted the name early last summer. HOG trended higher from last summer into the early part of this year, before settling into a trading range from late-January to mid-April. It left that range to the downside a few weeks ago, and we’ve seen a series of lower highs created on the daily chart since then as bounce attempts have repeatedly been greeted with supply. As a result, prices have worked lower in search of support.
Over the past week, HOG has successfully tested the early-May low, which is encouraging. Looking closer, that’s the same area the stock contended with in mid-January (a key support level from which the stock rallied $7), as well as last spring (April resistance which marked a multi-month high). This $36 area is clearly a major level.
Given that the multi-week downtrend from the early-April high has become perhaps a bit too predictable, as well as the fact major support has been found, this stock could be looking at an upside reversal in the days ahead.
I like the defined risk this play offers from a technical standpoint, but also due to the psychological implications a turnaround in price could mean. Not only would shorts need to cover as they see this stock strengthen, but longer-term bulls could quickly come to embrace this as a turning point for the name and put more cash to work as higher prices become more likely.
Here are two looks at the HOG chart, along with my strategy for this play:
Here’s a bit closer look with my entry & exit parameters.
As always, feel free to share your own thoughts, trade ideas, and questions down below in the comments section. And FYI ~ earnings are due out July 18 according to Yahoo Finance.
