Over the course of the past couple of weeks, our very own Luke Lango, Larry Ramer and Louis Navellier each shared their bullish case for Weibo Corp (ADR) (NASDAQ:WB), with Lango predicting WB stock could almost double within the next five years.
Their points were well taken, and perhaps more importantly, each of their insights were spot-on as usual.
This is a case, however, where I’m going to take an opposing stance, not because I disagree with the analysis of my peers, but because I think there’s an important context to their calls that’s surfaced in the meantime. As the old saying goes, “Timing is everything.” Right now isn’t quite the ideal time to take on a new trade on WB stock.
Time for the Pendulum to Swing the Other Way
On the off chance you’re reading this but aren’t familiar with Weibo, it’s a Chinese internet stock, in good company with the likes of Alibaba Group Holding Ltd (NYSE:BABA) and Ramer’s other suggestion, Sina Corp (NASDAQ:SINA).
It’s not a great deal like either of those peers, however. Rather, it’s most akin to Twitter Inc (NYSE:TWTR), in that it provides a very robust microblogging platform to China’s internet users.
There’s nothing else in China quite like it, largely explaining the company’s multiyear double-digit revenue and earnings growth pace. That strong growth also explains the stock’s over 500% advance over the course of the past two years.
More of that same kind of revenue and profit growth is likely in the cards too, fanning the bullish flames that have propelled WB stock higher for many, many months. If you can just wait a couple of weeks before jumping on board the Weibo train though, you might be glad you did.
The chart below tells the tale. No matter which resistance line or technical ceiling you use, WB stock is at or above its most plausible short-term peak, or the upper edge of a trading range that extends back for several months.
There’s also the not-so-minor fact that its RSI indicator reading is now in overbought territory. In the recent past, it didn’t take long for that overbought condition to be wiped out with a sizable pullback.
There is some good news regarding the shape of the chart. That is, the lower edge of the trading range (blue, dashed) is well-defined. Any pullback is apt to stop and reverse there. By the time it’s tested, that support line could be around $99.00, as it’s rising fast.
Sure, there’s always a chance the WB stock price could break under that support and dish out a painful move lower. It’ll be crystal clear when and if that happens though, which is one of the fringe benefits of such a well-defined support line.
Looking Ahead for WB Stock
It can’t be stressed enough that Navellier, Lango and Ramer were all right about Weibo’s growth prospects. This is a proven company on an impressive growth track, and WB stock is a name worth owning.
None of that analysis explicitly looked at timing any trade’s entry though, and while normally waiting for the right time to enter a new position isn’t necessary, in the case of a fairly volatile stock like Weibo, it may well be worth the wait.
We’re talking about a 20-point difference between buying at a short-term peak and stepping in at a short-term low. That’s roughly a 20% improvement on your entry price at the stock’s current levels.
Just something to think about.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @jbrumley.
