LL (Lumber Liquidators) was a recent Short Trade idea that hit the second target for a 38% gain back in July. I had discussed the likelihood of extending the final target to T3, which was listed as the potential final target on the previously posted charts. However, LL hit the second target before I had a chance to make that official and so I had to go ahead and consider the trade completed when T2 was hit (as it was too late to make T3 the final target). Fast-forward to today & LL has finally reached that T3 level, which is the level where the R/R no longer warrants remaining short (for those that held) as the odds for a reversal are quite elevated at this time. Final targets are set at the level where the R/R no longer warrants holding the position & more often than not, a substantial & often lasting reversal in the stock is expected.
As the updated daily chart (second chart) below shows, LL is trading at the bottom of what appears to be a bullish falling wedge pattern complete with positive divergence forming on both the MACD & RSI, all while trading just above that key horizontal support level (the previous third target). With the current near-term & intermediate-term trends still bearish for now, I’m still considering long trades as counter-trend trades until/unless the charts say otherwise. I also have some concerns about LL as there is a thin-zone just below the T3 support level which runs down to about the 34.25-34.10 level. If LL were to make a solid break below T3 (about the 48.90 level), there’s a good chance that the stock will back-fill that thin zone. Counter-trade or not, I’m looking for some new long trade ideas for both hedging exposure (for those positioned net short) as well as for those traders position net long, with a longer-term bullish outlook.
With that being said, LL offers an objective long entry here around current levels (51.40ish). This holds especially true for those with a longer-term bullish outlook who believe that this most recent sell0ff is over and the markets are headed much higher. My first target would be the former T2 level, with the actually target set just below the bottom of the July 9th gap at 69.65 (target = 69.55) with a suggest stop on a daily close or solid move below 48.60.