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Orchard Supply Hardware Down 16 Percent on Profit Taking

Shares of Orchard Supply Hardware (NASDAQ: OSH) are down 16 percent in late trading Tuesday. As we reported Monday, the stock was up 57 percent likely due to a short squeeze. Orchard Supply Hardware operates a chain of home improvement centers in California and has been a favorite of investors looking for a name not as heavily traded as Home Depot (NYSE: HD). The chain has close to 100 stores.

Today’s move is likely the result of profit-taking. In our report yesterday, we warned investors that moves of this size would likely result in downward momentum as investors fill the technical gap by taking profits. Today is confirmation of that call.

The stock still has much room to retreat after a large move to the upside. Volume is high. At 1.1 million shares trading hands–5 times the average indicating that there is large-scale sell interest in the stock. Investors looking for an entry point should wait until evidence of selling exhaustion exists.

Despite such volatility, the stock is still under the radar of media outlets. Coverage of the move is virtually non-existent making the stock even more of a risk.

Disclosure: At the time of this writing, Tim Parker was long Home Depot.

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