Happy Monday, Traders
I hope you all had a fantastic Labor Day weekend filled with relaxation, quality time with loved ones, and a well-deserved break. I personally had a great time. As Tuesday morning quickly approaches, It’s back to business and time for preparation.
As it will be a short, four-day trading week, I am not expecting fireworks. As is usually the case in my experience, I expect a slower, less volatile week ahead. Of course, anything can happen, so being prepared is always a great idea. However, it’s equally important to manage expectations.
Before I get into my top swing ideas for the week ahead, let’s briefly discuss last week’s action. Last week’s watch list went 2 for 2, as CVNA and CELH materialized and hit their targets. I strongly recommend playbooking each of those ideas and setups so that you can be better prepared to react accordingly next time and better familiarize yourself with the variables that make up each setup.
Here are two new ideas for the week that I like. As it is a short week, I am managing my expectations as mentioned above and not expecting any fireworks.
Carvana (NYSE: CVNA)
Last week’s top long idea worked out well according to the plan. However, this week, I am not looking for a long but rather a short opportunity in the name.
While the bearish sentiment remains strong in the stock, as the stock is now up almost 1000% year-to-date, with high short interest and bearish consensus analyst ratings and estimates, I think that after last week’s surge higher, the stock might need to take a breather.
After five straight green days, with the stock hovering near a critical resistance zone, I am looking for a pullback and short-swing opportunity.
My Trade Plan:
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
I have two potential entry triggers for this idea. Firstly, I will look for the stock to push up near $52 and fail on the hourly time frame, thereby confirming a lower high. If that lower high is confirmed, I will get short against the high of the lower high. After that, I will add to my short position on the short-term uptrend break at $50, which would act as absolute confirmation for my idea. My stop would remain near the lower high, possibly around $52.
For exits, I am looking to cover risk and half of my position at $48, Thursday low, and key support level. For the remainder of my position, I would scale out towards $45, covering an equal amount at each number from $48 to $45. My stop will be lowered to $50 once I cover the first half at $48.
The second entry trigger would be if the stock consolidated near $50 and broke below $50 and the uptrend. I would then get short against the day’s high and carry out the exact profit target plan outlined in the first entry idea. I would also lower my stop to $50 once the first profit target of $48 was achieved.
Affirm (NASDAQ: AFRM)
Shares of AFRM were up almost 23% last week and up almost 40% on the quarter after the company beat earnings and gave optimistic guidance for the current quarter.
Although the stock has been rocketing, analysts don’t seem to agree with the price action. AFRM has a consensus analyst rating of Hold and a consensus price target predicting almost 27% of downside, based on the $15.78 price target.
It’s an interesting setup and narrative. However, I am not looking to invest here but rather just looking for a pullback short similar to CVNA. I’m interested in the short here after the stock rallied significantly over the past two weeks and is approaching a major potential area of resistance between $22 and $23.
My Trade Plan:
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
This plan is very conditional for me. I am looking for the stock to push higher, above $22, and fail. After that, I want to see the stock hold below VWAP / hold red intraday for a considerable time. If that price action occurs, I will look to short the stock versus the high of the day, risking a maximum of $0.50, with my entry ideally around $21.80 – $22.
After that, the plan is to take profits near $20, a potential level of support. If the stock finds support at $20 and bases, I will cover my entire short. If the stock fails to hold $20, I will keep on ⅓ of my short position and target $19 as the final exit for the remainder of the position.