Is this a meme or a momo action? Rocket mortgage (NYSE:RKT) promotions are suitable for both tags.
Source: Laurie Butcher / Shutterstock.com
It rose 130% in March in March and then lost more than half of its value in three weeks. Three months earlier, it had climbed seven times more than 20% each.
Clearly, this is also an impulse stock that moves quickly and sharply. Investors who dare to do this must have strong stomachs. I say bring Dramamin and your helmets because it will be bumpy.
And here’s the spoiler alert: I love it here.
Three months ago I strongly assumed that RKT stock was profitable at $ 16.50. per share. Those who agreed received an increase of 40%. Since then, the price has returned to the starting zone that May. Therefore, today my conclusion is – it’s time to rinse and repeat. The caveat is that the indices won’t go down this fall.
Rocket has been hovering around its record lows for the past two months. Meme stocks in general have gone out of style too, so maybe they’re struggling with sympathy. We have seen similar actions in others such as Clover (NASDAQ:GLEV).
Long-term own shares of RKT
Source: TradingView charts.
From an investment point of view, stocks are attractive in the long term. Its financial statements are strong. The income statement shows impressive revenue growth. They more than tripled it in four years. Moreover, they are profitable and have a one-to-one price-to-earnings ratio.
No matter how you cut, this stock is skinny, but not bad yet. It was unable to break out of the uptrend that started in March.
Luckily he is trying to fix the floor. To do this, I would see how it works against the July 20 bottom. This candlestick was bullish because buyers entered with strength.
In addition, RKT shares have not closed lower since then. Hence, it is important for the bulls to defend the $ 17 level fiercely. Otherwise, they will fail and it will take a lot of work to recover from it.
What to do
If I already had shares, I would be patient for a long time. Along the way, I would also consider selling covered calls against them. Options are an essential tool for modern investors. This is similar to creating synthetic dividends, so it’s worth looking into. This is not the same as selling naked calls, which is extremely dangerous.
Investors wishing to add positions can do so, but not immediately. Stock markets are generally associated with external risk. We are still near all-time highs and investors ignore the end of QE for now. No, it will not end abruptly, but the cone is the beginning of the end. The process may take more than a year, but Wall Street rates the bad news months in advance.
In this situation, I prefer to sell the puts much lower than buy the stock directly. This could give me a big discount. And if this had not happened, then I would have earned from scratch. I like to take measured risks, and this method is the definition of it.
It’s not rocket science, but they were wrong
There isn’t much to say about RKT stock, other than that Wall Street might be wrong. Most of the analysts who cover it are of this opinion. Their average target price according to Yahoo finance just $ 2 above the current price. I bet that in due time they will raise these numbers.
Time will be the judge and investors must be patient. This is not a new company, this is only new to Wall Street. Quicken Loans has been in business for decades. RKT just needs time to earn prestigious points from investors.
As of the date of publication, Nicolas Shahin did not have (directly or indirectly) any positions in the securities referred to in this article. The opinions expressed in this article are those of the author and are published on InvestorPlace.com. Publishing rules…
Nicholas Shahin is Managing Director of SellSpreads.com.
Message Rocket Mortgage Stocks Won’t Stay in the Cart Forever first appeared on InvestorPlace…
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.