I said I'd post this one and here's the basic reason I went with some calls which I'd like to convert at some point if possible to equity long shares and ultimately to a larger equity short.
I don't prefer the 5-day chart in this case, but it is what I usually start out with to get a quick idea of the stock's character. Here with a Linear Regression Channel we see 2 channel busters, these are the counter-intuitive moves that are laced with upside volatility and seem like a blessing at the time, but are almost always a red flag as the reversion to the mean skips right over the middle and moves to the opposite side of the extreme, that's happened twice, typically it happens once and that's your top.
I don't care for the death cross or golden cross, but I know other technical traders watch them so Wall St. watches them. We saw a recent daily death cross of the 50 below the 200 day moving average. What this does tell me quickly is that UA's character has changed and changes in character precede changes in trend. So far you might be thinking I'm making the case for a short trade, I am, it's just that I think UA moves to shake out early shorts and in doing so provides a short trade that comes to us rather than chasing it and gives us a better entry with lower risk. In the mean time, it looks like the shakeout to the upside can be played as well, but if I had to choose 1 trade, it would be to be patient and wait for the short set up to come to us.
While I don't care much about moving averages, it's clear that technical traders respect them and Wall St. plays along. There are several instances here where the technical trader would expect the 50-day to hold as support and instead saw price slice right through, that's a trader who just bought at an instant loss.
A lot of shorts would have entered below the 50, below the 200 and on a death cross, that leaves a pretty decent potential shakeout. Maybe there's only a brief shakeout above the blue 200-day, if that's the case then the leverage of the calls makes it worthwhile, if it's a bigger move than I'd prefer take the call profit and buy shares long on the first correction or maybe just wait for the short set up, depending on the tone of the stock and market at the time.
The long term 5-day 3C chart and long term TSV 18 and 100 (5-day charts) show accumulation at the 2009 lows, a decent signal on the way up in stage 2 and distribution at stage 3 and just entering stage 4 /decline.
The daily chart confirms the same, but adds a relative positive divergence recently.
The more detailed 2 hour chart confirms the top and shows a more detailed positive divergence recently.
That positive divergence above put in a hammer bottom at the white box on increasing volume (always makes reversal candles more effective) and a flag like consolidation between the two moving averages with diminishing volume.
Here's an even more detailed 30 min chart, positive at the hammer seen above, it goes negative at the top of the flag creating a pullback and toward the end that pullback is seeing a positive divergence or accumulation, why? I think to break through the 200 day and shake out some new shorts.
With obvious technical price patterns that bring in shorts, we almost always wait for a shakeout because it almost always happens, technical traders are going by the book, Wall St. is flipping the book and their discipline on their collective heads, giving us a great opportunity if we are patient.
The 10 min chart shows the same things in the recent flag consolidation, a negative to send prices lower where Wall St. would rather buy and a positive divergence, this looks to be as good a place as any to go for a shot at riding a shakeout north and then reversing positions to a larger, less speculative short once those signals start coming in, but the market behavior is common, we have seen it so many time that we rarely enter a short the first break unless we got in at higher prices, but never chase them.
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