Hello Suckers …

After Medifast Inc. (MED) has been sold today I got back to my computer to search what happened beneath the surface. Was there something wrong fundamentally with the stock which just emerged on? I couldn’t find anything. At least anything, which would diminish the value of this stock as a long term investment.

The only news I was able to find is that the CEO of the company, Michael S. McDevitt, sold 30,000 shares on 12/28 at $35.30.

That’s it? This is what caused the sell off at so heavy volume today so the stock lost more than 10% today? I couldn’t believe that professional traders and investors would dump the stock just because a CEO sold 30k of his holdings? The CEO sold ca 0.027% of the total shares held by insiders and a little less than 10% of his own shares and the market panicked about it? I cannot believe it, unless there is something more which wasn’t published yet.

I would agree if CEO sold 50k or 100k of his shares (ca 300k total), than it would be a significant red flag. Today’s action when compared to the technicals and fundamentals of the stock confirms me that it was an action of the crowd of amateurs. I would even agree with profit taking, because the stock was climbing steep up for pretty long time and it raised from $6.5 to $30 per share which is impressive.

I checked the stock as if I would be buying it: its fundamental data, technical screening and I didn’t find any significant problem with the stock. When comparing weekly chart with daily chart I have a strong uptrend and this sell off is actually creating a buy opportunity. I am going to wait for confirmation either tomorrow or in January and if my analysis is correct I will buy this excellent stock back. If the technicals fail and the stock will continue falling I might try shorting the stock. But I will see either tomorrow or next year.

The only regretful thing is that I was stopped out by this panic, but rules are rules and since I cannot watch my holding as closely as I wish the trailing stop loss is my major exit strategy. However, I believe Medifast Inc. has a great potential for further growth and I am definitely going to watch this stock closely.