The Problem with SmileDirect Club SDC

It’s always painful when you get excited about the stock at the wrong price. You are always wondering what should you do next and how bearable and unbearable pain can become if the stock decides to underperform.

Case Study: SDC SmileDirect Club

I got excited about the stock in early Sep when it used to trade below $10.

Here’s one company where insiders are extremely bullish

This is what the stock has done since then

It quickly rallied to 13.5 around early October 2020 and formed a double top only to sell off violently to 200 dma at sub $9 levels.

What’s the Problem then?

I got excited at 13.5 thinking its a breakout 🙁

The stock then again made a comeback and in this comeback, it once again touched 13.5 but with a large candle [was that a trap?]. It looked like a breakout but the stock stalled and pulled back. So, anybody who initiated a long position above $13 would feel terrible at the recent stock performance.

Here’s the good news: The stock has once again bounced from 50 dma. The stock seems to have found support at the 10.75/11.25 zone. So, the downside appears protected for now. Any decline below 10.75 will be terrible for the stock.

The Momentum in the stock will only come once it again breaks past 13.5. Fundamentally, there is a compelling story but what needs to be seen whether the stock performs. If you hold the stock, continue holding it with a stop loss below 10.70. 

About the Business:

SmileDirectClub is engaged in the orthodontics business. It’s mainly involved in the sale of aligners, impression kits, whitening gel, and retainers. The company is trying to disrupt the high-cost orthodontics business with affordable solutions. The company has been on an aggressive path and forming partnerships. In Nov only, the company announced a partnership with MetLife in which MetLife will offer SmileDirectClub’s remote orthodontic care with its dental plans. It has all the elements in place for the stock to outperform.

Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers