PreMarket Prep Stock Of The Day: Robinhood

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

One unique aspect of the PreMarket Prep Show is the audience’s ability to ask questions through our interactive chat. An excellent question was posed and addressed during Monday’s broadcast on Robinhood Markets Inc. HOOD, which is the PreMarket Prep Stock Of The Day.

Wild Ride: After debuting at its projected price ($38), Robinhood put in place a double-bottom at the $33.30 area during its first two trading sessions. The following day it moved higher, but the rally was capped just under its IPO opening price at $37.98 and backed off to end that session at $37.66.

During its fourth session, it easily cleared the $38 hurdle and once it surpassed its initial high ($40.25), the momentum kicked in. For the session, it added nearly $9 rallying from $37.68 to $46.80.

Click here to listen to the Premarket Prep Podcast.

That set the stage for a massive FOMO rally, which took the issue to its all-time high ($85) and closing high ($70.39) on Aug. 4.

Major Inside Sellers: It's rare, but after only five trading sessions, a large group of insiders (98 million shares), decided they wanted to ring the register after the huge price appreciation. That instigated nearly a $20 drop on ($70.39 to $50.97) last Thursday.

Calmer heads have now prevailed and the issue is on the brink of its second inside day (lower high and higher low) in a row trading at the $57 area.

What Will It Trade Off? There are different catalysts for each sector. For example, financials will often move in the opposite direction of the iShares 20 Year Treasury Bond ETF TLT. The reason being the increase in interest rates, or the perception of, is good for the sector while being bad for the bond market and related instruments.

Along these lines, an investor from the chat asked PMP, “Why is Robinhood trading more with Bitcoin than Coinbase?” Spencer Israel offered up his opinion, which was spot on: “It’s too early to tell.”

Dennis Dick echoed the same sentiment and detailed the “Random Walk” theory as it applies to Robinhood in only its eight trading sessions since going public.

The full discussion on the issue from Monday’s show can be found here:

Moring Forward: While it may be too early to determine what Robinhood will trade off fundamentally, the technicals between the bulls and bears are at a stalemate.

Issues that have a big move in one direction will often have a counter move to test the validity of the move. That brings us to the area the issue currently trading. At this time, the issue has had a $51.75 rally from its recent low to its all-time high ($33.35 to $85).

A popular retracement level for investors is the 50% retracement. With respect to Robinhood, that level is $59.13. Interestingly, the rebound off the $50.56 from Thursday, was capped at $60.88 and $59.96, so far in Monday’s session but hasn't closed above it.

Bulls in the issue want Robinhood to clear the $59.13 level on a closing basis and hold over the next few days. If this scenario was to occur, the next relevant levels, for now, would be Thursday’s high ($66.50), its all-time closing high ($70.39) and its all-time high of $85.