Hi friends,
Today we will take a look at a potential long setup.
Our last trade idea Clover Health went in the right direction immediately and we saw significant returns in just a few days. You can read that analysis below.
Vimeo VMEO 0.00%↑ is an American video hosting, sharing, services provider, and broadcaster. The company derives its revenue by providing subscription plans for businesses and content creators.
The stock has been consolidating on the 10D exponential moving average and broke out of the sideways consolidation on Friday.
Vimeo Financials
While I’m solely looking at the technical analysis for a potential trade idea, I think it is worth looking into the financials in case people are interested in taking a longer term position, either long or short in this company.
At the moment of writing, the company has a $887M market cap. As such, it is a small cap, which are often more volatile.
In the beginning of August the company reported its earnings. Afterward, the stock soared and is up over 50% since. After digesting the initial move higher, the stock went on to consolidate and has now broke out once again.
The company published impressive results. Reported EPS came in at 0.06, beating expectations by 500%. Revenue came in at $104.376M, beating expectations by $4.93M or 4.96%.
The company generated $19.7M in free cash flow (FCF) this quarter, up from $12.4M over the same period last year.
Insider Purchases
What is fascinating as well is that in the midst of the rally, insiders continued to purchase shares. As you might expect, this added further fuel to the fire.
The most significant purchase was from director Adam Gross, who increased his stake by 22%
How To Trade?
VMEOs stock consolidated along its 10D EMA. On Friday, we saw a nice shake out demand tail below the 10D EMA, which likely took out quite some stop losses.
In addition, we saw decreasing volume and a sudden increase on Friday accompanying the breakout. Ideally, one would have entered went the breakout above the $5.22 level happened on Friday. Nonetheless, there might still be an interesting opportunity.
Personally, I would wait for a move above the high of the day ($5.37 level), with a stop loss below the 10D EMA. Another opportunity would present itself in case the stock moves lower and consolidates further again.
Tightness between the 10 and 20D EMAs would provide a significant opportunity with an even better risk/reward.
Plenty of opportunities to trade this one. In case we drop below the 20D EMA a solid short opportunity might even present itself. Nevertheless, I would prefer to trade this one on the long side.
The key to trading remains patience. As such, one should wait until a good setup presents itself. Never chase
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Have a great and profitable week!