Chart of the Week: Mercado Libre
Hey, good morning everybody. Happy Wednesday! It’s time for our chart of the week. And this week we’re going to be focusing on South American company/Brazilian company Mercado Libre; symbol is MELI. Let’s take a look at this chart. Had a nice breakout last week and followed through, so let’s take a look and see what we can figure out on this one.
As you can see here on the chart, the resistance level was roughly about $1,840, $1845. And that comes in on a high volume day, following a high volume day back in March. We tagged that level and came down sharply on earnings, and came sliding down on pretty good volume. Pretty good trend down. We hit that low around $1,350 and it was off to the races. And we have even a gap up here too.
But what transpired here for the past 2 1/2 months was basically a range-bound stock. So we see the stock was stuck in a range from about $1,550 up to about $1,770. It was bouncing around here. And then finally about a week or so ago, it got a break out. And it broke out above that March high on really good turnover. So you can see that turnover right here.
Indicators are bullish
Indicators are pretty strong. In fact, take a look at the MACD – it’s on a buy signal over here. We also have a very bullish Chaikin money flow here. RSI is up near the high levels where we’ve seen the stock pull back a little bit.
Unless you wanted to get involved right now, I would probably wait for a bit of a pullback. Maybe back down to this blue line over here that we put in here. That might be a spot to add some shares. The stock’s going to make a run after it comes back and retests that level. We’d like to see if this area between $1,800 and $1,840 holds on a bit of a pullback.
Watch for a pullback
I don’t know when that pullback’s gonna happen. We can be overbought and stay overbought for a while. We saw that happen back in November of last year. We got overbought just before Thanksgiving, and the stock stayed high and it kept going higher for about another 200 points while it was overbought.
Remember something: Overbought is just a condition, it’s not a signal. It tells you where the stocks are at a certain point in time. But you need to be aware that when a stock is overbought that corrections and pullbacks are subject to happen. The stock becomes very vulnerable at that point.
I do like Mercado Libre over here. It is an expensive stock. And if you’re playing options, options are also often very expensive. But that’s OK. Remember something: If you’re playing options, it’s a fraction or percentage of the stock that you’re playing. It is a high dollar stock. There’s a lot of stocks up there, like Booking Holdings – also high dollar stock. UNH is one as well.
But in this particular case – Mercado Libre – we think that there’s going to be a little bit of a pullback here to the support line and then a pull up possibly over $2,100, maybe $2,150. So that’s Mercado Libre.
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