Shorting an issue just because it's making a new all-time high isn't always the prudent thing to do for a few different reasons. The first is there are no resistance points to lean on for an exit point. Also, there is a chance the issue may be going into a “short squeeze” and others who shorted at lower prices may be forced to cover and drive the price higher.
However, taking a profit in an issue making a new all-time high can sometimes be the prudent thing to do. Especially if the issue has reached or exceeded the original profit set before entering the trade.
The aforementioned scenario can be applied to Accenture PLC ACN, which is the PreMarket Prep Stock Of The Day.
What A Year: Based on the monthly chart of the issue, there was never a good time to take a profit at a new all-time high thus far in 2021. After ending 2020 at $261.21, the issue declined in January to $241.92 and traded higher in eight of the next 11 months (including December). As of the close on Wednesday, the issue was higher by 44% in 2021.
Heading into Thursday’s session, the all-time high was made on Monday ($381.15) and all-time closing high on that same day at $377.72. It ended Wednesday's session not far off that level at $375.30.
Q1 Beat And Raised Guidance: Before the open, the company reported quarterly earnings of $2.78 per share, which beat the analyst consensus estimate of $2.36 by 17.8%. The company reported quarterly sales of $14.97 billion, which beat the analyst consensus estimate of $12.61 billion.
In addition, the company raised FY22 EPS guidance from $9.90-$10.18 to $10.32-$10.60 vs. $9.01 estimate and Q2 sales $14.3-$14.75 billion vs. $12.48 billion estimate.
PreMarket Prep Take: When the issue was being covered on the show, it was trading at the $414 area. Co-host Dennis Dick was the first to comment stating, “There is one thing I do not do and that is shorting stocks at new all-time highs.”
The author of this article encouraged investors that an original target in this area to stick with their original trading plan. For those looking for more on the upside, it was imperative the issue take out the current premarket high, which at that time was $417.40.
In addition, investors were alerted to pay close attention to the opening price as an indication of whether or not there were still buyers at these elevated levels.
Price Action Off The Open: After a much higher open ($413.45 vs. $375.30), it went only another $0.20 higher to $413.65 and reversed course. As of 3 p.m. ET, the ensuing decline has found support well ahead of the top of Wednesday’s range ($375.88), only reaching $401.20, and has bounced back to the $400 area.
Moving Forward: Assuming the current high holds, it may be used for a profit target in the future. With the issue destined to make a new all-time closing high in Thursday’s session, that will be another level to use as a reference as to whether or not the issue has reached a short or long-term peak.
The full discussion on the issue from Thursday’s show can be found here:
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