Not only are we coming into the end of the month, but also the end of the first half of the year, as well as rebalancing in the Russell indexes. I've watched several names get whipsawed today, and I don't expect it to get better this afternoon. The last few minutes of the day could be entertaining.
Alpha Pro Tech (APT) took a big hit around 1:45 pm this afternoon with shares falling around 8% in a five minute period. It appeared to be tied to the White House's resistance to require mask usage. From a political standpoint, moving beyond suggesting any kind of face-covering feels like a loss for the current administration, and this is an administration then rarely wants to admit it made an incorrect call. Ironically, that's not unlike many traders, so we can probably chalk it up to human nature.
We are seeing Florida and Texas, two of the first states to open for business, backtrack their moves. Additionally, many areas in Texas have moved to a face-covering requirement. Arizona, Florida, Texas, and California are all moving that direction, if not there already. APT stock ran higher into the increases in Covid numbers this week. The stock likely found buying in traders trying to front run its addition to the Russell 2000 and Russell 3000 Indexes.
When you combine those front running with the White House refusal to simply pound the table on face-coverings, you get the quick, nasty selloff we've seen today. Late buyers feel trapped in shares. Those with stops have likely been taken out. Doubt is now in the stock, but I like the opportunity for a speculative long as well as a nice balance against other positions that could drop if Covid increases.
The daily chart on APT will look ugly with today's action, but the weekly chart is showing a breakout above $15 with a target of $20 to $21, potentially as high as $25. We have this long flag pattern, building since March that has now been breached to the upside. Within that is a V-shaped bounced from the $10 level. The concern here is the channel pattern was wide. A $5 wide channel on a stock trading between $10 and $15 screams volatility. But we have multiple secondary indicators working in support of the price action on the bullish side. The parabolic stop-and-reverse will crossover bullish at the close today. The Full Stochastics is trending higher and ready to break above 50. Additionally, the StochRSI still has room to run higher.
No, today is not ideal, but I think it provides an opportunity to buy the stock with a stop on a close below $15. The upside target is $20 to $22, so a trader is risking $2.25 versus a potential reward of $3.00 or greater. Those are odds I'll take in this market, especially if my holdings struggle when Covid news hits stocks.
