One Last Bear Rampage to End 2022: Stapled Consumers

Hershey's Kiss

Hershey's is putting in some bearish candles. The yearly is starting to look like two former highs. The years: 1998 and 2005.

1987, 1999, 2011 and 2023 are all Rabbit Years in China. If Hershey's puts in a bearish candle, that will boost my suspicion that next year could be much more volatile than 2022. Will it continue or break the pattern of down, up, down, ______?

Death of the Permariser

There are several ways to play the next leg of the bear market. One is the walking dead. These are stocks and funds such as ARKK (I choose because it's been beaten down, I haven't look at it as a new target yet) that lose all support in the capitulation wave down. These are companies or funds filled with companies, that can conceivably have a target near $0.00 without some positive force. Another one I haven't examined: DOCU. Maybe there is more to their business, but signing documents online seems like something that other companies can offer. I don't like these myself though, mainly because the puts are expensive. In-the-money puts can be profitable, but OTM puts offer a terrible risk/reward setup.

For better risk/reward, one potential category is the defensive sectors and permarisers. These are companies and sectors that have outperformed. My favorite example right now is Hershey's (HSY). The stock made a new all-time high in August. You can plainly see the lifetime support line, the accelerated support line from 2009 and the even steeper ascent from 2020. It is a 30 percent trip down to the 2009 support line and 50 percent down to the lifetime support line. If I'm right about this bear market, Hershey's will start experiencing a rapid drop once this current trendline is lost.

These are tough plays because until they crack, they keep rising. Timing is everything with these, but many permarisers have turned to trash in this bear market. Paying 25 time earnings for a company growing earnings at 10 percecnt isn't value and it isn't defensive. Eventually, these stocks will be dumped.

Staples Components

These are staples components in XLP, VDC and FSTA. Some of these aren't really staples in my opinion, such as EL (below), COST and WMT (not below). I have a large put position on XLP and some "flier" puts on HSY and PEP (also not pictured).

Engulf Crisis

I will not be shocked if the S&P 500 Index ends up with a bearish engulfing candle into the close. Unlikely, but not impossible because last major support is around 3580 on the ES. As for stuff that is already or almost engulfed, here are a few. Note that if there is a trendline visible (uptrends, not horizontals), it is at last a few years old. Some are lifetime. I included QQQ to show how far away it is on the indexes. It would take a major drop in the last hour to get there. If the market drops another 50 points or so, them majors will still be well off Thursday's lows, but there will tons of these candles out there on individual securities.

Another one almost almost guaranteed if the market dips a little bit: Tesla.

Hershey's Kisses Support

I've felt this way before. I've been right and wrong before. I think the market is doomed, imminently. Probably after the CPI tomorrow, which might include a sharp rally. Above 3700 and I'm wrong. I bought OTM puts on HSY.