In the last two months Slack has just been consolidating inside a bullish pennant while bouncing off its 382, which was also the key resistance level for all of Q1 2020 (notice it tested it 5 times before finally breaking out to ~$40 per share). This Friday, Slack closed just under the 50DSM. My guess is it'll breakout of this potential pennant soon. It may have one more rejection at 33 or 34 and retest with a higher low, which I'd view as a good opportunity to add to longs. This is considered a high probability low risk trade.
The risk I see is this... when markets are strongly supported (which is one way to categorize a trade as high probability), they can fail in a big way. In the case of Slack, *IF* this pattern fails, it would fail in a big way (like a big gap down). This makes insuring the position cheap and worth doing (because it's very unlikely, but would be a big pay-off). If long with a sizeable position, it's a good idea to have a far OTM put option as a hedge.
The risk I see is this... when markets are strongly supported (which is one way to categorize a trade as high probability), they can fail in a big way. In the case of Slack, *IF* this pattern fails, it would fail in a big way (like a big gap down). This makes insuring the position cheap and worth doing (because it's very unlikely, but would be a big pay-off). If long with a sizeable position, it's a good idea to have a far OTM put option as a hedge.
Comment:
I was anticipating one more down move after a quick run into 33.. but not this severe. A break below the dashed line below puts WORK at risk of cascading lower (where it'll likely just stop people out and reverse higher fairly quickly, but I don't want to bet on that).
Comment:
Key reversal today is possible. The lows need to hold. My stop is the red line
Trade closed: stop reached:
I got stopped out yesterday for a loss and now only holding my put option hedge (which are doing well).