I’m always looking for stocks with ideal technical setups, and my favorites are charts with long-term uptrends and short-term retracements. This setup has proven so profitable that most institutional quant models include a momentum factor commonly referred to as “12-1 Momentum,” which essentially looks for strong 12-month returns and relatively weak 1-month returns. Weak stocks. I actually call this setting a “wide spacing” chart. In baseball terms, a wide pitch is a fastball over the plate that you swing at no matter what the count is because there’s a good chance you’ll be able to get the ball into play. Therefore, this kind of fat chart can often provide excellent “buy the dip” opportunities when the chart is in a major uptrend and then has a proper retracement to form higher lows. This week we may be looking at the unique situation of Crocs, Inc. (CROX), which is down about 12% from its peak in mid-June. After hitting all-time highs around $165 a few weeks ago, CROX has fallen back to the rising 50-day moving average, a level that typically serves as support for major uptrends. Returning to the November 2023 lows, we can see CROX pull back to the 50-day moving average multiple times, and after briefly falling below this smoothing mechanism, the price tends to recover and create new swing highs. We can also see that the RSI is currently slightly above the 40 level, which tells us that despite the recent price pullback, price momentum remains quite bullish. The bottom panel shows a relative performance line tracking the performance of CROX versus the S&P 500 Index. Since the November 2023 lows, the relative line has gradually sloped upward, and I can confirm that this stock has been outperforming. If I had the opportunity to buy an outperforming stock on a pause in an uptrend, I would certainly take that opportunity. A brief trendline analysis also suggests that we may be at an ideal entry point. Price lows in November and January coincided fairly well with subsequent lows in February, April and May. That trendline is right around where CROX has been trading this week. We can also note that this week’s price action sits squarely between the early June low and late March peak, forming a so-called “pivot point” that has been tested and confirmed multiple times in recent months. If you find yourself struggling to buy breakout stocks because it feels like you may have missed the best parts of the trend, then a pullback stock like CROX may be a better fit for your investing approach. Even the strongest uptrends will have pullbacks along the way, and they can often serve as ideal entry points to participate in the next leg higher. Disclosure: (None) All opinions expressed by CNBC Pro contributors are theirs alone and do not reflect the opinions of CNBC, NBC UNIVERSAL, its parent company or affiliates, and may have been previously published by them on television, radio, the Internet or spread on other media. The above is subject to our Terms and Conditions and Privacy Policy. This content is for informational purposes only and does not constitute financial, investment, tax or legal advice or a recommendation to purchase any security or other financial asset. The content is general in nature and does not reflect any individual’s unique personal circumstances. The above may not apply to your particular situation. Before making any financial decisions, you should strongly consider seeking advice from your own financial or investment advisor. Click here to view the complete disclaimer.
