Stock Trading

Is Radioshack RSH Stock A Buy Yet?

Today, Radioshack RSH stock is trading at all time lows, and that seems to excite a lot of investors.

Stocks trading at all time lows bring out the bargain hunters in full force and the message boards are teaming with thoughts about how far down this stock can go.  It’s not a bad strategy. In 2009 a lot of stocks were trading at all time lows — and a lot of those stocks recovered like crazy.

One need look no further than a weekly chart of $CAR (Avis Budget Rent-a-Car) to see what’s possible if you call the bottom right:

car weekly

After loosing -97% of its value with the market sell off in 2008-2009, and trading down well below a dollar, CAR rebounded in a big way back to all time highs in the 5 years since for a gain of over 13,000%.

And some others didn’t.

Others went away forever along with any dollars invested in them. Like this bad boy —

lehman brothers

 

So, I’m sure you can see that it’s very important to do your homework with these types of trades and know what to expect.

So I thought I’d check out the hourly, daily and weekly RSH charts to see just what we’re dealing with.

Hourly RSH Chart:

rsh hourly

Talk about a cliff dive. That’s pretty much as bad as they come. When they say “Don’t try and catch a falling knife”, this is what they are talking about.

For a short term rebound play this might be worth it as it can bounce from this oversold condition and push up anywhere between this price level and $2.10 depending on how fast and mean the move comes.

And at these price levels with this harsh of a downside move, a bounce could very well be possible. On that note I will be watching those $1.50 levels for a channel breakout to the upside.  Okay, let’s move on:

Daily RSH Chart:

rsh daily

Now we’re really beginning to see the cold reality of this situation. RSH stock has sold off -67% in just the last year alone — with every single rally being sold further down. That, and we’re well below the 50 day MA. I see nothing inviting, other than the possibility for a dead cat bounce. And to be fair, those can make a lot of money if you time them right.

For instance, a dead cat bounce from here might take you up to the $2 mark — that would be a gain of 50%. Not bad.

Let’s keep that in mind as we move onto —

Weekly RSH Chart:

rsh weekly 2

Okay, this is just getting funny now.  The further out we go, the worse this looks. And while there can be value in looking for beaten down stocks, you have to realize that each one of those new lows all the way down from $25, $20, $15, $10, $5, $4, $3, $2 — looks like a sale.

Doesn’t it?

Each new low looks like a new bargain — until price breaks even lower.

Finally, I’m going to look at —

Monthly RSH Chart:

rsh weekly

Here we can really see the truth of the matter.  From a high of over $79 down to $1.33.  That’s a loss of 98% of the value of Radioshack stock.  That’s why I like to trade breakouts and new highs. Not that that method doesn’t come with its own set of problems, but you usually know which direction you are going —

Up!

Here, the real trade in Radioshack  stock was from the years 1995 to 2000 along with the rest of the tech boom — and even then this would not have been the best stock you could have chosen.

But let’s look at the chart anyway:

rsh monthly hayday

That’s when Radioshack stock was happening! That was the heyday.

Now we’re at $1.33.

So, let’s just say, for the sake of argument, that we are contrarian traders to the end — and we’re looking to buy RSH no matter what anyone says because we’re willing to risk a small portion of our capital to get outsized returns if we are right — what should we do?

Well, all we need to to is go back to the CAR chart and take a closer look:

car close up

You wait.

You wait for high volume sell offs to happen.  You wait for a bottom channel that lasts for several months (or years) where volume dries up and then you wait for a rebound. Yes, you could have bought CAR at the very bottom at .34 — but you had no way of knowing that price wasn’t going to continue lower.

All in all, right now, on all but the lowest time frames, RSH stock hasn’t put in anything that even remotely resembles a reversal pattern.  And because of that, if you are a longer term contrarian trader, I would still say wait. After all, if your time horizon is years, and you are looking for thousands of percent, what’s a few months?

Disclaimer: I own ZERO shares of RSH.

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