This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Mattel: Bears Ready to Romp

Volatility squeezes work both ways.

A very narrow trading range will often end with a bang. The stock just seems sleepy, meandering around in a little channel as if no one really cares about the shares.

Buyers are not so eager that they will push the price too high; nor are they too disciplined that they'll refrain from buying at current levels. At the same time, sellers are not so eager that they just start banging out bids indiscriminately; nor are they so stubborn that they hold out for higher prices.

The result is a lazy trading range that attracts little attention. But at some point, either the buyers or sellers wake up and become more aggressive.

Aggressive buying may push the stock higher than it has been in a while, thereby attracting more buyers. Alternatively, aggressive selling may start filling all the demand very quickly, prompting additional buyers to back away and wait for lower prices.

Either way, volatility increases, and those who are on the right side of the trade profit handsomely, while those who are on the wrong side of the trade sustain significant losses.

One stock that is just now pushing out of a volatility squeeze to the downside is Mattel (MAT - Get Report). Let's take a look.

Mattel has been trading sideways for the past couple of months, generally trending between $28 and $29. Such a prolonged bout of low volatility will lead to a volatility expansion -- the stock will move one way or the other in a big way. We just don't know the direction until it actually takes off.

Here, as you can see on the chart, on Wednesday the stock finally broke decisively below the 50-day moving average for the first time since last July. That's a big negative.

But even more telling is the environment in which the decline occurred. Both the Dow and the S&P 500 hit record highs yesterday, and Mattel fell more than 2.5%, closing at $27.68. Simply put, everybody was buying ... but nobody was buying Mattel.


Mattel (MAT) -- Daily


1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
GG $17.74 -0.36%
LRCX $82.59 0.25%
MAT $25.75 -0.43%
AAPL $130.93 -0.65%
FB $79.50 -0.80%

Markets

DOW 18,040.84 -85.28 -0.47%
S&P 500 2,111.56 -9.23 -0.44%
NASDAQ 5,082.0750 -15.9010 -0.31%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs