Following-up on my last post about The Scumbag Trade of long coal/short Tesla, note the first chart below of TSLA on the daily timeframe.
Here we have a stock in a clear uptrend, but one that is very extended on longer-term timeframes too. What this means is that the higher up you got without a proper price correction to normalize the weekly and monthly charts, the more you should be on lookout for a bull trap of a head-fake higher before the correction commences. We used that analysis in May regarding the biotechnology sector, as well.
Recently, Tesla broke out from an obvious consolidation on its daily chart, but is now struggling to follow-through. The 20-day moving average down at $97.88 has held like a champ for months on end. But it has been tested a bunch recently. The more you probe support the more likely it is to fail. My sense is that another test will lead to failure. So, I would be stalking the name for a short on weakness.
Next, we have a monthly chart of Walter Energy, the coal stock. I know the stock was halted twice last week and the firm might be a mess. But I am using the chart just to point out the idea of perhaps playing coals for a quick bounce off major, multi-decade support, since price has memory, especially of this magnitude. After a bounce (who knows how long it lasts, hence the risk and need to be nimble) all bets are off.
These can both be argued as brazen ideas and there is nothing wrong with taking a pass on them altogether. However, if executed properly they both have enticing rewards.
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RSI on the daily and weekly of KOL also oversold.
Not quite sure we got the capitulation yet in all commodities, but I would still at least expect a playable bounce here.
good point–much more of an art than a science
WLT??…you dirty bird you.
That said I am long X so I should not be throwing stones here