Scotts Miracle-Gro (SMG) has only reached the cloud on a monthly chart three times in its 30+ year history on the exchange and every single time has proven to be an amazing and rare buying opportunity for long-term investors. If you're a long-term investor this could be a perfect time to cautiously dollar cost average (DCA) down. In the worst-case scenario, the price could go into the 70s or upper 60s. In the best-case scenario, the price rebounds from here and you would have missed a rare buy opportunity.
Not financial advice.
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Meant to say *breached the cloud
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I got stopped out of this trade, so I'll note here that I was unsuccessful. Although I still believe this is a good long-term play (for investors with a year or longer timeframe), it's nonetheless important to use stop losses to prevent catastrophic drawdowns or margin calls when trading. My trading strategy is that once I am stopped out, I will not re-enter my trade unless (1) 30 days have passed, otherwise, the IRS will not let you use the loss for tax purposes due to the wash sale rule, (2) the charts are extremely convincing that there is enough upside potential to justify the risk to re-enter.
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Just thought I'd update this post because the shorts are overdoing it with SMG. The amount of standard deviations that SMG has dropped from its peak has a Great Depression fully priced in (the Great Depression was a 7 sigma decline, SMG is nearing an 8 sigma decline). I've seen smaller declines for companies that declare bankruptcy or which are getting delisted. A short squeeze is coming soon, probably. An easy long trade would be entering a position when daily price closes above the 5-day moving average with an ATR-based trailing stop loss. If the shorts continue, then you lose some, if a short squeeze occurs, then you win big. Try to catch an entry when the VIX is oscillating back down on the weekly.
I will also add that there will be upwards pressure here from the adjacency to weed legalization. So I also love this.
SpyMasterTrades
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@Juskickenit2, Great point. I think that it's a no-brainer to add this beaten-down stock as part of a long-term investment strategy. That's why I've been accumulating in my IRA.
Chartguru1
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Great charting. I completely agree, dividend to boot!