Posted on July 26, 2021
We’ve already traded Revolve Group for a 750% return once this year.
Can we do it again?
Revolve markets clothing to young women, and its stock has gone teen batty of late.
A massive price surge late last month is attributable to its inclusion in the Russell 3000 index, after which all mutual funds and ETFs that track Russell indexes had to buy the stock.
Since then, however, price action has cooled, and we’ve a hunch there’s little left of the teeny bop buying that brought us this far.
Consider the fundamentals –
They’ve virtually nothing left to sell.
The sum total of their haul was $540 million.
No typo there.
FIVE HUNDRED FORTY MILLION BUCKS CASHED OUT.
Two charts to look at now, the daily and weekly, both of which reveal a stock that’s on the verge of a purge.
Here’s six months’ worth of daily –
Technically, the picture’s as follows –
Now look at the weekly –
The weekly technicals are highlighted by –
And it’s for all the foregoing that we offer the following –
A Jew and His Money recommends you consider selling the RVLV September 17th 75/80 CALL spread* for a credit of $1.10 (5.00/3.90) and buying the RVLV September 17th 65/55 PUT spread** for a debit of $3.65 (5.60/1.95). Total debit on the affair is $2.55.
Rationale: with spreads reasonably tight, we like the structure here.
The short CALL spread defrays the cost of the PUT spread nicely, offering us the opportunity to gross $10.00 on $2.55 spent ($7.45 net).
Maximum loss is $7.55 (difference between the CALL strikes plus initial debit), should RVLV go on to set new highs and close above 80 by expiry.
Breakeven on the trade is $62.45.
A fall to the RVLV 50 level, where support from the 137 DMA and the upper Fib reside, is not at all out of the question.
May Hashem show us His might, His glory, His radiance and His tzedek – and soon!
With kind regards,
Hugh L. O’Haynew