Moving into next week, I have Coty Inc. $COTY on my watch list for a swing trade. There are a few things I like about the chart: It’s been showing some nice consolidation since the beginning of March that has led to a rising 50 day moving average and, in the near term, the chart has formed a Symmetrical Triangle. It’s also presenting the “Golden Cross,” which is when the 50 day moving average is crossing above the 200 day moving average. Both the Golden Cross and the Symmetrical Triangle are bullish signals.
I posted the below chart on StockTwits to demonstrate both of these chart patterns. Note the blue line (50 DMA) crossing the pink line (200 DMA) and the formation of the Symmetrical Triangle.
So price is trending in the proper direction and we have some bullish chart signals but, in my opinion, what makes $COTY one to watch is that nearly 37% of the 42 million share float is sold short. That is a massive short interest. Buying pressure for a stock with a short interest that high often leads to rapid short covering and an ultimate short-term breakout, which is perfect for a swing trade.
Below is the short interest data via shortsqueeze.com:
I will be looking to take a position in $COTY if it breaks through the triangle at $29.20.
Disclosure: The author holds no position COTY but make take a long position in the next 24-48 hours.