Cardlytics (CDLX) made its initial public offering a little over a year ago. While it is not uncommon for a newly listed stock to take time to build a trading range, CDLX broke to a new high for the first time in a long time since September 2018. The relative strength also soared to a new high today, which is very bullish. The volume has been surging over the last three days as the stock broke out to new highs. The question now is this: Should you jump on this stock?
Usually, after such a big push higher, I wait for a move like this to consolidate before taking a position in the stock. Notice that the PPO, a momentum indicator, is right near the top of the range it has been in. While the enthusiasm for the stock is roaring, it might be better to look for a place to enter when the stock pulls back.
Cardlytics helps banks manage their loyalty reward programs. As companies continue to hunt for ways to keep hold of their clients, loyalty programs have been one method. While they are not foolproof, the programs do help maintain customers.
The range of the chart goes from $10 to $30, a 200% move off the lows, so there is lots of movement. It is best to keep that in mind when investing in a breakout trade that has been shooting vertically and is a double since May 1. While it looks like they have something working, I would wait for a better entry, but will definitely add it to the watchlist.
Good trading,
Greg Schnell, CMT, MFTA
Senior Technical Analyst, StockCharts.com
Author, Stock Charts For Dummies
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