Two Potential Investments
ENPH and INMD on the radar
You may or may not recall the sniper entry on DIS or AMD, but I’m watching ENPH and INMD moving forward for a potential repeat performance. We’ll first monitor to early entries and there will likely be a higher low snipe entry on these in the future. For now, ENPH has a setup in place now, while INMD may need a bit more time to set up. For reference, below is the before and after picture of DIS with the location specified for the investment entry.
INMD is analogous to my AMD long from last year. I waited all year for a very specific spot. Everyone thought that China was going to invade Taiwan imminently and therefore there was no bottom on AMD. I thank them for their liquidity. In the case of INMD they are an Israeli company. Given what is going on in the Middle East, the market is significantly discounting their valuation out of fear. I will buy that fear and sell this back to them in a few years once price has tripled. They are a highly profitable company. While there are also non-conflict reasons for their growth to be under pressure, these valuations (and in particular where I seek to enter) are getting and may get quite ridiculous. AMD then vs now below. “Come to Papa INMD".”
ENPH has come under tremendous pressure along with the entire industry. For sure their growth has stalled which has allowed their valuation to become more reasonable. Followers that have been with me for a long time know that I shorted ENPH at the absolute top and predicted an epic collapse. We have now completed the “falls so fast it goes backward in time” stage. Now it is time to consider buying the absolute puke, especially because we have a solid potential setup here for a first attempt, and then can monitor for a second attempt.
If you are not in the discord we discussed this setup on ENPH (see Diary and group discussion). On Friday ENPH looked below and failed both the prior week’s lows and VAL and formed a massive excess low with excess starting precisely at the prior week’s VAL. This is meaningful as it suggests that prices below there are unreasonably low. ENPH then continued in a strong trend day up, closing about last week’s VPOC. This set, MANY names did the same thing on Friday AND new market generated information (MGI) could come out to ruin this setup. However, the risk is VERY clearly defined for an attempted bottom snipe here. There are definitely safer entries that may present in the future, but this one is so clear that I’m willing to take it and risk a very small loss. Again, I ABSOLUTELY stop out on investment entries when I’m looking for a bottom snipe. I simply don’t hold bags. When you hold a bag on an investment and continue to average down you find yourself selling the first pop and watching it run WAY further without you. I guarantee many if not most of you have done this.
The ENPH Setup:
I would ideally like to enter on a dip to get as close to my known risk as possible. Objectively one would want ENPH to hold it’s VAL for this past week which sits around 76.8. However, there is a look below and fail setup into the 76.31-76.61 range that I would take. A hold of 76.8 is fine as well. The stop on this is any interest below 75.31. I won’t set a hard stop right at 75.31 but if you aren’t able to monitor it after entry then setting a hard stop 20-30 cents below there is reasonable. One can always re-enter at a later time. If ENPH does NOT hold 75.31 and the last 2 week lows then it is likely going to the 57-64 range. Last week’s VAH (~79.05) would be the first target. At this point I will do one of two things with investment bottom snipes.
Trim 10% to get SOMETHING green and then set my stop so that the entire “trade” doesn’t go red. This would involve calculating a stop just below entry that accounts for the profits taken already to keep the trade flat.
Simply set my stop to breakeven. If you’re okay with taking a small loss and keeping your stop where it was then that’s your choice. I generally prefer to not take any losses once a trade or investment goes green unless I REALLY want the name. I can’t put ENPH in that bucket.
If this sets up, I enter, and price goes in my direction I will monitor the development of value from here to determine potential trims or exits. I do not bother with price targets for this reason. When someone has a price target it leads to them either selling too soon or holding too long. I held AMD from $12 to $150 which would have been FAR FAR above any reasonable price target I may have had.
The INMD Setup:
INMD has a lot of work to do. I don’t see an entry for this week barring something like I saw on ENPH. Put this one on your radar. The green ranges/rectangles below are where I would absolutely love to enter. These ranges are 14.06-14.31 and 12.91-13.20. However, it is possible that price firms up near this recent low. If you mark 18.5 on your chart and look left you’ll see why. This wouldn’t be a hard level for me, but you can see the big gap down in February 2020 caused the loss of INMD’s trading range since November of 2019. The VAL of that trading range was right around 19.20 and that has been reclaimed and (barely) held on Friday after holding 18.57. The break of this range led to the absolute monster move up to $100 so I consider it highly relevant. It is a little too ugly for me to call an entry now, but I would definitely be on watch for price to firm up here for a potential entry. It is currently trading in a 4-week balance with a high of 22.05 and a low of 18.57. Balance rules apply here so if one were to try to long the low of the balance with a stop below 18.57 (call it 18.50) then technically that is fine. Taking a breakout of the top of the balance above 22.05 is also fine. This then leaves a bit uncertainty about risk as acceptance back below 22.05 in the future COULD find its way back to 18.5s. But it technically is a higher probability setup.