MoviePass: Don't Front Run During Coming Attractions

The price action in shares of the trendy Helios and Matheson Analytics Inc. continues to drove home some important lessons for traders of all levels. The very notion of "buying dips" in this type of bull market we have seen on the major averages for years on end, with only mild interruptions, would seem to imply that names like HMNY would be the epitome of a no-brainer buy into its first pullback off a high buy volume run-up. 

Indeed, we discussed the name for Members during its spectacular rally throughout late-September into the first few weeks of October. 

However, we also did not want to become automatic buyers into pullbacks merely because of the firm's heavy MoviePass stake, high buy volume prior rally, popularity among traders and in financial media, or for any other reason you may associate with the price action. Simply put, we wanted to show the discipline to wait for what we wanted to see--Actual signs of buyers presenting themselves in a meaningful way at a given area of potential support.

That has yet to happen, though, at least not with type of staying power we like to see. It is rather easy to see an early bounce and declare it to be "support." And while that may look great when it holds, a more sound approach is to typically wait for at least a daily closing basis followed by continued strength off the given level.

And that brings us to this morning, with HMNY off by nearly 14% as I write this. 

The updated HMNY daily chart, below, shows the 20-day moving average (orange line) failing to convincingly hold as support last week, with the floodgates opening lower this morning.

Going forward, HMNY may still very well be a jaw-dropping winner into the holidays and perhaps into 2018, too, with MoviePass serving as a catalyst. But we want to have the patience and discipline to wait for a quality setup in lieu of throwing caution to the wind and straying from discipline merely because a name like HMNY becomes the new flavor of the month.