As of 06/14/2021
  Indus: 34,394 -85.85 -0.2%  
  Trans: 15,194 -133.18 -0.9%  
  Utils: 915 +2.33 +0.3%  
  Nasdaq: 14,174 +104.72 +0.7%  
  S&P 500: 4,255 +7.71 +0.2%  
YTD
 +12.4%  
 +21.5%  
 +5.8%  
 +10.0%  
 +13.3%  
  Targets    Overview: 05/28/2021  
  Up arrow36,000 or 33,000 by 06/15/2021
  Up arrow17,000 or 15,000 by 06/15/2021
  Up arrow950 or 875 by 06/15/2021
  Up arrow14,600 or 12,950 by 06/15/2021
  Up arrow4,400 or 4,000 by 06/15/2021
CPI (updated daily): Arrows on 6/14/21
As of 06/14/2021
  Indus: 34,394 -85.85 -0.2%  
  Trans: 15,194 -133.18 -0.9%  
  Utils: 915 +2.33 +0.3%  
  Nasdaq: 14,174 +104.72 +0.7%  
  S&P 500: 4,255 +7.71 +0.2%  
YTD
 +12.4%  
 +21.5%  
 +5.8%  
 +10.0%  
 +13.3%  
  Targets    Overview: 05/28/2021  
  Up arrow36,000 or 33,000 by 06/15/2021
  Up arrow17,000 or 15,000 by 06/15/2021
  Up arrow950 or 875 by 06/15/2021
  Up arrow14,600 or 12,950 by 06/15/2021
  Up arrow4,400 or 4,000 by 06/15/2021
CPI (updated daily): Arrows on 6/14/21

Bulkowski's HGG Trade

 

This article discusses a stock trade I made in hhgregg (HGG).

HGG Trade: Backstory, 2B Trade in HGG

When I first discovered hhgregg (HGG), I thought it was another Michaels Stores. With Michaels, I made almost 5,000% and it allowed me to retire at 36. Sadly, it's not another MIKE (which fell into private hands and no longer trades).

HGG sells consumer electronics and appliances in 110 stores in the mid west and southeast, a competitive retail segment with Circuit City declaring bankruptcy and Best Buy doing its best to grab the Circuit City scraps before HGG can. HGG is shooting for 400 stores in the next 10 years, is gaining market share from weaker competitors, but expansion is hurting free cash flow.

Half of revenue is from video products, such as flat panel TVs and Blu-ray players. Home appliances, refrig, stoves, dishwashers, and so on make up 35% of sales with 15% in audio, mattresses (can you believe that?), notebook computers and other popular consumer electronics and accessories. It sells 100 models of TVs and 350 appliances with same day delivery. The company uses highly trained sales associates, commission based, which helps educate consumers and allows more up-selling. Insiders bought lots of shares in Nov '08 and then sold in June '09, some in Feb '09.

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HGG Trade: Setup

Picture of a hhgregg on the daily scale.

The picture I used to make the buy shows the breakout occurring a day or two before I bought. Here are my notes from the buy. "A symmetrical triangle breakout, but it's on low volume with market perhaps making a pullback to a head-and-shoulders top, suggesting more down ahead. Since breakout volume is low, I'm going to reduce the position size."

HGG Trade: The Buy

I bought the stock and received a fill at 17.01.

The next day, the stock dropped on news that the company would sell several million shares. I wish I had known that ahead of time... When the stock gapped up four days after I bought (July 21), the company signed the agreement to issue new stock, up to 4.25 million shares, at 16.50. One insider picked up 60,606 shares at 16.50 on that day. The stock closed at 18.41, so he made a tidy profit without doing any work.

The stock peaked at A before drifting lower over the summer. When the stock neared the price level of A, I took another look at the stock.

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HGG Trade: The Sale

I don't like the highly competitive nature of the appliance business so I changed my mind about the stock. The day after price peaked at B, I sold at the open.

If you look closely at B, the candle is black. The Dow closed higher almost 100 points on that day and above 10,000...but this stock dropped. I don't like that type of divergence, so I figured this was a 2B chart pattern. That's a fancy name for price forming a double top instead of continuing higher.

I sold the stock and received a fill at 19.27 for a gain of 13% in about 3 months. As the chart shows, the stock has declined since I sold.

Picture of a hhgregg on the daily scale.

HGG Trade: Aftermath

As the chart shows, I was correct in the short term for selling the stock.

In November, the stock found support and began to climb and a few days ago, it climbed above the price at which I sold. That's the way it goes sometimes, but I don't regret selling this one.

-- Thomas Bulkowski

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More

See Also

 

Support this site! Clicking any of the books (below) takes you to Amazon.com. If you buy ANYTHING while there, they pay for the referral.

My novels:  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Trading Classic Chart Patterns

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