Etsy rejection from upward channel resistance
Pattern: Upward trendline resistance, looking for a rejection of that line with continuation. ETSY is also at the top of the bollinger bands on the daily, weekly, and monthly charts. Also, bearish divergence in the moneyflow chart.
Edge: The stock has risen almost 300% in 2018 alone, and we are shorting the rally here looking for a retracement of that gain. We are not looking for a long term bearishness. We view the overall market as bearish right now and we are adding to our short positions after yesterday's low volume rally. We like to short high growth stocks in bear markets, as they tend to have the highest volatility and are most negatively affected in a slow growth market.
Risk Management: We are buying March $50 Put contracts for this. Entered at $4.00 per contract. We bought these when the underlying stock price was around $56. Stop loss right above the all time high today ($58.35). PT1 is around $52, PT2 is around $43.50, and if we get to PT2, we will probably keep holding to look for a gap fill. At that point, depending on how much time has elapsed we might roll our puts to further dated puts. There are two large gaps that are unfilled around $36 and $23.
Notes:
The puts are 30 delta so if we get stopped out when price reaches $58.35, we estimate that the contracts will be worth around $3.35. We're prepared for a drop to $3.00 to be conservative.
Edge: The stock has risen almost 300% in 2018 alone, and we are shorting the rally here looking for a retracement of that gain. We are not looking for a long term bearishness. We view the overall market as bearish right now and we are adding to our short positions after yesterday's low volume rally. We like to short high growth stocks in bear markets, as they tend to have the highest volatility and are most negatively affected in a slow growth market.
Risk Management: We are buying March $50 Put contracts for this. Entered at $4.00 per contract. We bought these when the underlying stock price was around $56. Stop loss right above the all time high today ($58.35). PT1 is around $52, PT2 is around $43.50, and if we get to PT2, we will probably keep holding to look for a gap fill. At that point, depending on how much time has elapsed we might roll our puts to further dated puts. There are two large gaps that are unfilled around $36 and $23.
Notes:
The puts are 30 delta so if we get stopped out when price reaches $58.35, we estimate that the contracts will be worth around $3.35. We're prepared for a drop to $3.00 to be conservative.
Comment:
correction: stock has risen almost 200%*
Trade active:
Great follow through move today! We took profits one half the position at $52.30. We just missed the $52 price but would like to still get out at a decent profit. Also moving stop loss to just below entry at $55.50, or $4.10 per put contract. which guarantees a profit for the remaining trade.
Trade closed: target reached:
We got stopped out of the remainder of our position at $55.50. Nice quick profits on this options trade.