Face it, the country is getting older. Demographics are
changing. The Mustang Sally's are becoming little old ladies from
Pasadena. Eventually there will be huge demand for nursing homes,
assisted living, and adult day care. So naturally companies in
this space should benefit as more and more baby boomers reach
that age where they need a little extra help getting around.
Today, about 1 million Americans live in senior care
facilities. That number is expected to double by 2030. Long term
care facilities saw over 8 million people in 2012 alone. By any
metric you measure it, demand is increasing at an impressive
clip. Many companies have entered this wide open space due to the
relatively low barriers to entry. Among them is our Bull of the
I am usually the momentum trader that finds high flying stocks
to buy high and sell higher. Today I'm going to show you another
side to my trading. Today I found a stock that looks more like a
turnaround story than a momentum stock. This stock was brought
back to life in November and now looks like a high flier. Now the
stock sets up for a conservative trade with limited downside risk
as long as your stops are set properly. Given the recent
volatility, this stock could also double if the earnings story
continues to strengthen.
(AFAM) is a Zacks Rank #1 (Strong Buy) that has turned things
around recently. The Louisville based adult day care provider is
focused on serving adults looking for alternatives to traditional
nursing home placement. The company provides transportation to
and from its centers which are open 7 days a week and serve about
60 patients per location. This stock once traded in the $40s but
after a deteriorating earnings picture the stock has been dead
money for the better part of four years now. A quick look at the
Price and Consensus chart shows a stock that has struggled in the
face of downward earnings pressure.
The technical picture on AFAM is really a tale of two stocks.
One stock was the washout we saw from late 2009 until November
2013. An ugly chart that kept getting worse and worse by the day.
The other story is the strong rally we saw from November 2013
until now. This is a great momentum story that has investors
hungry for more. Whenever you see a huge jump in stock price
fueled by earnings, it really helps to lean on Zacks Rank. From a
technical perspective, huge jumps are great for Fibonacci
The Fibonacci levels can be used to help me determine where a
stock may see support after a big run. In the case of AFAM, the
important level that we are concerned with is the 50% retracement
of the run from November 2013 to the high in December. This gives
us a price level right around $26 as a good support level. The
trick is to watch this area of potential support and wait for a
buy signal from, in this case, the stochastic indicator. Well in
the case of AFAM, that's exactly what we have. The stock found
support around $26 and just a few days ago showed a bullish
stochastic cross while the stochastics were oversold.
This combination sets up AFAM for a good chance of rebounding
from the level we are at now near $27 to retest $30. The best
part about this trade is the downside risk is limited. You can
put a tight stop loss just below $26, maybe even down at $25 and
have a very favorable risk versus reward on this trade.
ALMOST FAMILY (AFAM): Free Stock Analysis
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