Big Upside for RetailMeNot Inc
RetailMeNot Inc (NASDAQ:SALE) may provide consumers with savings when they shop at a retail location or online, but they have done little for SALE stock investors. SALE stock is currently down 76% since peaking in February 2014. One can argue that shares are on sale, and perhaps they are, but investors’ enthusiasm towards lower prices is quite different compared to consumers’ enthusiasm for the same.
A bear market has ravaged share prices and investors were targeted in the slaughter. I am not going to dwell on the past, other than to say that the past is a window to the future. I will attempt to walk through the following charts to illustrate that there is evidence on the horizon that suggests that there is reason for optimism.
The following chart illustrates the bearish action that has dominated trade.
Since the share price of RetailMeNot first peaked in March 2014, the trend has been down. That trend was defined by lower highs that were confirmed by lower lows. It can easily be identified as the price moves from the upper left to the lower right. This is clear example of the staircase pattern that defines a bear market.
Chart courtesy of StockCharts.com
There are two parallel lines that define this trend. The pattern is known as a “descending channel”. A descending channel has two trend lines that define the upper and lower bounds. The share price oscillates between these two lines for as long as the trend permits. A trend reversal occurs when shares finally gather enough strength to break out of the channel.
On August 2, 2016, SALE stock broke out of the channel that defined its bear market. The following chart illustrates the breakout.
Chart courtesy of StockCharts.com
The breakout that was witnessed on August 2, 2016 was glorious. The share price broke out by gapping out of the descending channel. The way SALE stock performed, this trend reversal is significant because breakaway gaps rarely get filled and almost always signal that a new trend has started. The gap in price is an instant bullish confirmation of the breakout.
At the same time, the moving averages are converging. It is only matter of days until a golden cross is executed. A golden cross is a bullish signal that is produced when a 50-day moving average, highlighted in blue, crosses above a 200-day moving average, highlighted in red. Traders use this signal to confirm that a bull market is on the horizon. It is wise to trade in the direction of this signal. A trader’s position should either be long or neutral in the face of this signal.
The trend reversal suggested by the breakout of the descending channel is being confirmed by the breakaway gap. The convergence of the moving averages suggests that a possible golden cross will further confirm the premise.
The Bottom Line on RetailMeNot
All the evidence suggests that the worst is over for RetailMeNot. I am not suggesting a challenge of the all-time highs, but in the interim, I think investors will be pleasantly surprised by the bullish action that might follow. I will be waiting patiently for a setup pattern that will give me the required price objective in order to complete a trading strategy.
I base all my analysis on technical signals, of which not all investors are willing to accept. If a fundamental approach suits your needs, then I strongly suggest you check out the report that our lead tech editor just released, “Military’s ‘6th Branch’ to Create 22,000 Millionaires Again?” Click here now to get the full story. This could possibly be a once-in-a-lifetime opportunity. Check it out.