The set-up: Momentum traders bailed out of Castle Brands after it reached its near-term high of $2.22 on June 6, driving it all the way down to $1.48 before Wednesday’s earnings beat. The good news resulted in an immediate bounce-back, but there’s room for more.
My back story in ROX: I got interested in ROX after Castle Brands announced a deal with WalMart to put its Goslings brand ginger beer into more than 4,500 Wal-Mart stores. Who doesn’t love a great Moscow mule, right?
I first bought ROX on March 12, and have realized $40,000 in gains in it this year. I still hold 20,000 shares. While I’m mostly a short-term swing trader, I love a good long-term play when the technicals line up with a good story, a good balance sheet, a good fundamental reason for going higher and news; it’s how I make more than my typical 5 or 10 percent, so while a lot of swing traders might cash out now, I think there’s room to run.
The stock’s back story: One-third of the stock is owned by billionaire Phillip Frost, and Bloomberg reported in late April that the company is considering a sale in the face of takeover threats. Either way that plays out, it’s good for me.
My next move: I’m standing pat, and might buy more if it falls back to $1.74. My expectation, however, is that ROX breaks above its trend line high of $2.22. If that happens, I expect it to break through $2.30 to about $2.50 before it consolidates. It will take a few weeks, maybe a month; I’m willing to wait.
Jason Bond runs JasonBondTraining.com and is a swing trader of small-cap stocks. At the time this was published on RagingBull.com, as described in the article, he held the stock (20,000 shares), was hoping to reach a near-term goal ($2.50) and had a point where he’d buy additional shares ($1.74). He had no additional options or orders in ROX.