A Dynamic Situation

Last night, my intrigue into what charts would look like if I flipped them around their horizontal axis generated what this bullshit blog would consider a ‘minor buzz’.  I appreciate the recognition, even garnering accolades from a “fucking tool” ;). 

Ok, here’s where we get real. 

I didn’t short anything today. 

From trading these patterns over the years, the longer they take to develop, the lower their chance of success.  When they start meandering along the bottom of the recent swing range, I start to look for better opportunities and begin peeling off shares because I can feel my edge disappearing. 

As bearish as I was on those stocks last night is as neutral I am tonight.  Of course I’m still looking to short those companies (and one other I’ll mention here in a minute), but my conviction is starting to waver. 

What does this mean for me as a trader? 

With each day we creep sideways, I’m willing to risk less and less on a pronounced move in the anticipated direction.  Couple this trepidation with everyone (and some mothers) seeing “bear flags” on all of these charts.  With that I’m becoming more and more inclined to either watch, put on a position to account for the lower volatility, or just say “fuck it” and go long (ok, that pretty much covers everything…). 

When everyone starts talking about a particular element of technical analysis theory, I start to question the validity of that theory.  If it is true, and the stock market is looking to punish the largest number of people possible at all times, then it seems pretty obvious that, right now, those people are those acting on these bear flags, no? 

As this situation develops, if prices continue in this narrow range on low volume, I’m going to open some long-dated strangle positions in a few different stocks.  Much like my $QQQ strangle trade from last week (which would have worked much better had I gone for longer dated options), I am looking for an increase in volatility in these stocks sometime in the future.  The longer we meander (especially if the market continues to be so harmonious between sectors), the odds increase for a pronounced move in either direction.  With this trade, time and waning volatility are my enemies.  I can (mostly) mitigate for time by buying long-dated options.  Even with all of that, these stocks are still looking ripe for some downside:

$DFS: Still riding right along those moving averages on low volume.  The more it tests 24.5 the greater the likelihood it’s going to blast through it.  I still really like this to the downside with a target around 21.  You can see what I’m talking about with the longer prices meander in the bottom of the channel from mid-late July.  It looked ‘ok’ between 7/11 and 7/18…that failed…by the 27th this was in trouble.

DFS

$EBAY: This one is upside down because I didn’t show it last night.  I must say, if I was long this stock, I would have an itchy trigger finger to get the hell out on any weakness…so take that for what it’s worth. I do like the volume drying up though.

EBAY

POT: This is still my top short pick.  I think it will go below 52 on a move lower.

POT

$CBS: Remember the Saturday night Howard Stern show on CBS in like 1998 or 1999?  That was weird…though the animated segments were incredible.  Anyway, I still like the look of this one to the short side as well.  Target: 22

CBS

If you follow me on Stocktwits, you’ll be updated, in real-time (!), with all of my (hair-brained) trades, ideas and posts.  Good day to you.

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