At its June 1 high, POT scored a 155% gain off its December, 2008 Bear Market low. A sizeable selloff of 33% began two days after the 50/200 DMAs made a "Bullish" Cross, which was not a good entry long into the stock. Be careful with those Bullish and Bearish Crosses.
On earnings in late July, POT broke out of a Falling Channel and rallied directly to the top of The Channel (the tall, white candle). Since then, the stock has traded sideways-to-down, forming a Right Shoulder for a pattern morph from a Falling Channel to an Inverse H&S pattern. Shortly after the Opening Bell yesterday morning, POT broke out above the 97.75 - 97.72 neckline on nice volume and raced to 99.12.
The general market sold off pretty hard in the morning and after the early breakout in POT, and it eased off two dollars from the 99.12 high. Despite the weak market and the fact that the general market has been on an upside screamer for the past month, I decided to get long the pullback with a target near the early high, just below the round 99.00. In addition to breakout buying, there was short squeeze potential in a breakout like that, even in a down market. Bears aren't favored shorting, or remaining short, a bullish technical breakout.
With the Dow still down 100 points, POT managed to rally back to the morning high within a half an hour of my entry, where I sold. It rallied beyond that, to 100.64, before closing at 99.56.
Gain: $1,550
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