Why I’m Souring on Lemonade

Jim Cramer points out Real Money that the stock market, “has lured so many younger investors in the market that they are impacting stocks like never before.”

This includes soaring insurance disruptor Lemonade (LMND) . We looked at LMND on Dec. 22 and wrote that, “I currently do not find any technical reasons to bail on the position but taking money off the table is a good idea. I would raise stops on the balance to $90.” The $160-$173 area is the next potential price target zone.”

Prices have reached and passed the top-end of our target zone so we have to ask: now what?  

In this updated daily Japanese candlestick chart of LMND, below, we can see that prices have tripled in less than two months. Let me say that again — prices have tripled in less than two months. Wednesday’s candle pattern could be a spinning top formation and could mark a top reversal. Prices are trading at twice the level of the rising 50-day moving average line.

The trading volume has been heavy since early December. The On-Balance-Volume (OBV) line is strong and the latest input on the 12-day price momentum study tells us that upside momentum has peaked. Interesting.  

Why I’m Souring on Lemonade, Manu Divers

In this updated daily Point and Figure chart of LMND, below, we can see that the software is now projecting the $234 area as a potential price target. 

Why I’m Souring on Lemonade, Manu Divers  

Bottom-line strategy: LMND has announced a secondary offering of 4,524,314 shares of stock but it has not yet dented traders enthusiasm for the stock. With a stock that has tripled in so short a time and could be making a spinning top pattern, a more seasoned trader would probably be wise to take profits and maybe even take a trading vacation (I remember older commodity brokers would council younger traders about this — not to let a big gain influence your objectivity).

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