Build-A-Bear Workshop v1.2: Clear Skies

$BBW: Free above the $26-cloud

I have often said, that to buy on a rising market is the most comfortable way of buying stocks. I must buy on a rising scale. I don’t buy long stock on a scale down I buy on a scale up.

— J. Livermore

Livermore said it best about buying the trend. BBW is on an uptrend leading into Q2 earnings despite the macro-headwind news grappling the market, e.g., China’s stagnant growth numbers, Moody’s threat to downgrade certain banks, and hawkish August FOMC Minutes. Fortunately, the Make-Your-Own teddy bear company seems impervious to the correction, at least for the moment.

Overbought on the Daily

The short-term daily trendline is intact, but the Slow STO is still near the overbought area as of Aug. 18. As alluded to in my earlier posts, my thesis was that the market has yet to price in any new information to allow it to surge past BBW’s 52-week ATH at 26.39 before Q2 ER on Aug. 24.

Clear skies above all-time-high

Let’s zoom out for a bit. A monthly chart going back to its IPO, BBW is at an important juncture as it circles back to the ATH area from 2006 in the upper-20s. One common attribute I’ve found on breaking the ATH on most equities is that new highs establish a baseline as there’s less oversupply of shareholders who need to sell at a loss. The volume-profile also illustrates this in the above chart.

Let’s just hope that the teddy bear company delivers this Thursday.

Disclaimer: I have a long position in BBW, with out-of-the-money LEAPS expiring on January 19, 2024.