There's a nice symmetrical triangle setup for AFRM on the 15-minute chart, which should resolve in the coming week, and likely in explosive fashion.
Adding extra spice to that is the yellow line that seems to head straight for the intersection of the declining (red) line connecting the recent highs and the ascending (green) line connecting the recent lows. What is that yellow line? It's the VWAP going back to the stock's 2021 IPO. For young stocks (under 5 years), this is often a highly relevant level. An initially uncontested break of that line, such as happened in early December, is always highly suspect to me. So I am not surprised that the stock ran out of steam and retraced its way back to that VWAP (almost to the penny!) on Feb 1. For the last 6 weeks, AFRM has oscillated around that important level, but I imagine that the symmetrical triangle setup will finally resolve the direction for the coming weeks and months.
Once either the red or green line is broken by 25¢ or more, I plan to enter in the direction of the break.
Adding extra spice to that is the yellow line that seems to head straight for the intersection of the declining (red) line connecting the recent highs and the ascending (green) line connecting the recent lows. What is that yellow line? It's the VWAP going back to the stock's 2021 IPO. For young stocks (under 5 years), this is often a highly relevant level. An initially uncontested break of that line, such as happened in early December, is always highly suspect to me. So I am not surprised that the stock ran out of steam and retraced its way back to that VWAP (almost to the penny!) on Feb 1. For the last 6 weeks, AFRM has oscillated around that important level, but I imagine that the symmetrical triangle setup will finally resolve the direction for the coming weeks and months.
Once either the red or green line is broken by 25¢ or more, I plan to enter in the direction of the break.
Trade active:
Looks like we got our decision. Unfortunately, I was busy with other trades, and while my eye was off the ball, AFRM dropped a quick 5%. So, my entry isn't ideal. I got long the Apr. 19 35.50/32.50 put spread @1.27. There's not much time on this, so it will be on a short leash. If the stock doesn't progress down further, I'll be out by the end of the week.
Comment:
Still in this trade. It's doing good. There's now a small double top that has the potential to push the stock towards the 32.50 strike of my short leg, which is where I would want to exit the trade.
Trade closed: target reached:
Out of the spread at $1.95 for about 50% return. I'm happy with the outcome, given that my entry wasn't ideal.