There are a number of setups that I am looking at this week across a broad spectrum of markets. They include TEAR, GRVY and SQ.
1. Short TearLab Corp On Reverse Split (TEAR)
TearLab Corp initiated a 1:10 reverse split on Monday in order to fulfil exchange listing requirements. The stock ended the day higher by 15%. My research suggests reverse split stocks make good shorts and I will be observing this one closely on Tuesday for a potential break.
I do not recommend more than a 10% cash position as these short trades are high risk.
2. Gravity (GRVY) To Come Back To Earth?
Vince Martin from Seeking Alpha is an analyst I like a lot and this is an interesting article on South Korean gaming company GRVY. Martin says that this is a good company but after a ~500% price rise it is due a pullback.
Monday’s price action was bearish. This is another potential short trade with stops to be placed above $40.
3. Looking For A Breakout In Crude Oil
Observing recent price action in the energy space you can see that volatility has significantly dropped. Crude oil has been stuck between $52-$56 since December and price action has been even slower over recent sessions.
This slow period is likely to precede a strong break in one direction. It’s not clear what direction that will be but it’s likely to be triggered by a news event. For now this is a market to watch and be ready for a sharp news driven move.
4. Squeeze Rally For Square Inc (SQ)
The Trade Ideas team picked a great trade last week with JASO and they are back with another interesting long position this week with Square Inc. (SQ).
Square had blowout earnings last week that took the stock to new 52-week highs. With a 37% short float this has seen a sharp squeeze. With traders still scrambling to close their positions, the prospect for continued momentum is good. This trade is now live at $17.63. Traders will want to keep a tight stop and refrain from chasing above $18.
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Thank You For Reading
Please make sure you are aware of the potential high risks involved in financial trading, especially when shorting stocks on margin and trading with leverage.
All charts from Finviz.