I just purchased additional shares of ELON at 2.23. Stop loss is at 2.10. Objective is at least 2.97 but more likely it will be 4.00. Risk/reward ratio is 5-1 with a bigger potential of it being a 13-1 risk/reward ratio.
I mentioned yesterday that ELON has been acting weakly and that the stock is at risk of breaking down. I have been considering getting out of all my positions that I have now had for over 2 years (February 2011).
Nonetheless, in all fairness the stock is at a point that is pivotal here at the 2.21 intra-week level of support. The stock has gotten down to 2.22 today and chart-wise the stock needs to hold this level and if it does it could be meaningful.
The stock closed at 2.26 in January and at 2.13 in November so even if the stock closes below 2.26 today it still has the 2.13 (2.06 intra-week) level of support left so breaking the 2.21 level (2.26 level in a daily closing basis) is not critical. Nonetheless, if there is any fundamental reason to believe this company will survive and move forward this level of support at 2.21/2.26 has to hold up. Chart-wise there is a double bottom at 2.06/2.10 that should NOT be broken or even seen again, but it does not need to get retested again since it was already tested with the 2.21 low seen in January. As such, this move down could be another double low at 2.21/2.22 which would be a decent to perhaps strong positive "if and when" it holds up.
What I am trying to say is that chart-wise it makes sense to buy the stock here and put in a stop at 2.10 (would create a triple bottom and therefore likely to break) that would offer a great risk/reward ratio.
Based on the weakness seen in the stock this trade would be a low probability trade, but you just can't find much better risk/reward ratio trades that this. This is NOT an official mention as I have no good reasons to believe the stock will move up. Nonetheless, chart-wise the parameters are "very clear" and the risk is small.