One Last Bear Rampage for 2022: Semiconductors

Looking at the ascent on some of these, I think I might go 10 percent or more OTM on options. My expepctation is they will descend faster than they ascended. KLAC gained 57 percent from low to high in barely more than one month. My expectation is it will trade at a new low, which would require a minimum loss of 365 percent. TSM doesn't have the greatest chart, but it gained 40 percent in two weeks. Likely to lose it all as fast, if not faster.

The Next Shoe Awaits

I have been very busy the past several days, finding trade setups, doing the 30-day blogging challenge at BitPost and the day job. That's my caveat for this observation: the market has declined steadily in September, but this sell-off feels different. The word that comes to mind for this pullback is quiet. There has been no major spike in the VIX. The prior dips all saw some bearish bravado, bulls whining about "why won't the market go up" or crowing about buying the dip. For myself, I was mostly breaking even in the prior dips because gains were given back. Maybe I'll see my profits get blown up by a face-ripping rebound, but right now my whole options portfolio is up about 50 percent in the past few days, far more than I was in prior pullbacks and I'm more aggressively short than I have ever been in nominal terms and percentage terms. A week ago I was thinking about throwing in the towel and I will probably throw in the towel if this rally reverses because if that happens, my hunch is the "real" correction or the bear market itself won't start until after the taper begins. I know myself thoguh, and when I'm ready to give up is usually when the turn is finally at hand.

Additionally, the quiet means there are still great setups. A lot of stocks have broken key support levels, but have not started cascading lower. I bought a slightly out of the money puts on Chipotle this morning. The stock is above trendline support, but only about 2 percent away. Last time it lost its 50-day moving average in May 2021, it quickly shed 10 percent in a couple of weeks. There's a gap down around $1600 that is only about 12 percent away. Back on September 8, I posted Shorting High Value Stocks. I revisited the topic on September 24 in Looking for the New RCAs.

I accumulated more puts on ASML as the stock bounced a bit. There are some like CMG that only recently broke their 50-day moving averages. The FANGs aside from FB and APPL are high priced, as are stocks such as SHOP, MELI, ALGN, IDXX, ISRG, HUBS, RH, etc. Not all of these are great short candidates, but they are examples of "The stock is too damn high!" More seriously, when the VIX eventually rises, some of these high prices stocks will quickly drop. Their put options are cheap if timed correctly. Speaking of which, one of the market leaders busted its March 2020 trendline today. I will post it tomorrow after the open.

Shorting High Value Stocks

Bought puts on this one today. LRCX looks much worse chartwise, but I'm positioning for a big beta move down in the market, not simply stock specific.

Look at this thing. Maybe my timing is wrong, but good lord. A one-third decline would only be a normal correction, it wouldn't even qualify as a bearish move in my opinion.

Tech Starts Cracking, Dollar Threatening Breakout

I'm not pressing my bearish positions to the floor yet, but did add some puts on AMD today. Every prior bearish move like this has evaporated and already this one being bought midday. Shotgun comments follow.

XLF a real bear move will see the current short-term pattern form the lower case h-patter and it begets more lows. XLE approaches the blue former support line, below could unleash more rapid selling. Not expecting a collapse like in March 2020, but could be big profits for short-term bearish trades. SMH looks like overthrow bulltrap, below that red line would be bearish. Wedge pattern breaks for ASML and LRCX, AMD already broke it's multiyear wedge and failed at former support several times. Bought puts on DE again after exiting in June. I have puts on EWZ because I anticipated a drop in tech and a rise in the dollar. Target is the green line. Have July puts, if I think green line will break, I will rotate to August. TLT calls doing well, but TLT coming up on 200-day MA and a gap at $147.94. Volume profile says there's not much resistance until around $151 though. UUP is mashed up against resistance and a horizontal. A move through 92.77 on DXY should trigger a breakout in the dollar. BTC is still at risk of a bearish breakdown. Not posting silver, but it tends to be inverse of dollar.

Semiconductors

AMD taggin resistance, ASML approaching support. I'm looking for a bull trap to spring on technology. Tech has been positively corelated with interest rates, except when rising bonds are bearish for stocks. Traders have aggressively run up technology stocks on the assumption of a Goldilocks drop in interest rates.