Mikey_Scali

AFTERPAY (ASX:APT) potential short

Short
ASX:APT   AFTERPAY LIMITED
APT appears to be overextended to the long side and may be due for a slight correction.
Reasons for this evaluation:

--> Solid Bearish Engulfing candlestick pattern has occurred ( Bearish reversal)
Last 2 bearish engulfing patterns along with an overbought RSI resulted in a reversal. This indicates a higher probability trade setup.
--> RSI is moderately overbought (As of the 22st @ 66.59)
--> ATR is at record highs
Each new major ATR high has result in some form of correction whether small (5-10%) or large (100%+)
--> Other Large Cap stocks on the ASX such as BHP , RIO , FMG have also provided bearish signals in the last few weeks and an overall market downtrend can support this evaluation

Reason that oppose the success of this evaluation:

--> APT as a single stock has a tendency to follow fundamental analysis rather than technical
This includes being extremely responsive to news catalysts, positive forecasts and more
--> Positive news reports in regards to tech and software can positively effect APT

**Any Supporting ideas that can improve the analysis of APT are all welcome

Trade closed: target reached: This current analysis was a success after a 8% move! This trade has potential for a further down turn due to factors such as a potential correction and other negative news. However the piercing pattern that occurred yesterday indicated the possibility of a minor price reversal therefore causing me to exit the trade in the short term in order to find another swing.

I do however believe there may be another drop prior to earnings. Which i will be observant of. This belief is supported by the ATR which is still severely overextended as well as the RSI still hedging an overvalued range.
Comment: Great exit choice for the trade as APT ran up 7% today!! Gotta love candlestick patterns! Piercing pattern was a grouse warning sign

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