Leading gun manufacturer Smith and Wesson (SWHC) surged on the very day President Obama announced an executive order on gun control.
Logic may suggest that gun stocks would decline on such news but no, defying logic, the gun manufacturer surged 20% higher today.
Let’s see what happened, plot the price chart, and move forward from there:
First, we see a rising stock price trend and a bullish breakout in high volume in December 2015.
Today saw another surge with a breakout gap off the rising 20 day EMA (green) near the $21.50 level.
Price currently trades above $26.00 per share to continue a strong uptrend.
We can see the strong uptrend clearer on the Weekly Chart timeframe:
So why is this happening?
First, logic takes a back seat to price realities and there’s always something going on behind the scenes.
Yes, President Obama issued an executive order increasing background checks on gun purchases and other measures, but something’s happening at the company level, along with the macro level, with Smith and Wesson.
SWHC surged largely in part due to the company increasing its forward guidance for revenue projections and full-year guidance.
Broader data also show increased purchases of consumer firearms.
As consumers fear their access to guns (purchases) may be restricted, some rush out to purchase guns simply due to fears of increased restrictions.
Stock prices reflect expectations of the future, not the present.
Continue following the price trend on the higher frame in this uptrending stock – that which is strong tends to get stronger.
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Corey Rosenbloom, CMT
Afraid to Trade.com
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