After summarizing Fastenal’s dour commentary on non-residential construction, I pointed out that a retest of former resistance would make an attractive entry point on the stock.
As planned, I initiated a (swing) trade on Fastenal (FAST) as it probed the 50DMA support over the past several days. Today, FAST bounced off the 50-day moving average (DMA) with a 3.4% one-day gain and strong volume (almost 50% higher than the 3-month average). This is a very encouraging sign and signals a high likelihood for more upside before this trade ends. The initial target is a retest of the highs set before earnings with a stop directly below the 50DMA. The chart below shows the set-up.
*Chart created using TeleChart:
My bearish opinion on the overall market (S&P 500) still holds. Any and all longs here are swing trades riding a bounce from oversold conditions. I was surprised that the market did not bounce more strongly in the immediate wake of last month’s 2-day spike in the VIX. I was even more surprised that the two additional days of selling to close out January did not send the VIX spiking to fresh highs for January. For now, I give the benefit of the doubt to the resistance looming directly overhead on the S&P 500 in the form of a now declining 50DMA.
Be careful out there!
Full disclosure: long FAST