With the hype of an economic slowdown, one might think a stock like this would be doing very well, however, it has been in a funk—moving sideways to down through the back half of 2015—and Greg Harmon of Dragonfly Capital uses technical analysis to illustrate why he thinks it currently looks like a good buy.
Five Below (FIVE) emerged to fill the gap between a dollar store and those offering products for more than $5. Or so it would seem. With a range of 41 to $5 on any item, it is a step up from the dollar stores, although they look pretty similar inside.
With all the hype of an economic slowdown (I am not in that camp for the record), you would think that the stock would be doing very well. In fact, the stock has been in a funk, moving sideways to down through the back half of 2015. With the turn of the calendar to 2016, though it is showing signs of life, now the stock looks like a good buy.
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The chart above shows many technical factors aligning, creating this environment. First is the inverse head and shoulders pattern. This triggered with a push through the neckline to end last week. This pattern gives a price objective to at least 44.80. Next, the last step higher that created the right shoulder was a run of about $6. This gives a measured move higher to about 42.80 on a break of the current consolidation.
By Greg Harmon of Dragonfly Capital
