2021-12-17

Premarket: Tesla Fills the Gap

Tesla has filled the gap as far as I'm concerned in premarket, at $911 per share. It needs to trade there in regular trading hours to count, but I suspect it will. The question next is does it bounce, or has it broken support. There was strong support at $930 as I pointed out a couple times yesterday. Today could be wild in either direction and Tesla may be at the center of it. I cannot stress this enough: almost every time we have come to a point like this in the past, outside of March 2020 and maybe autumn 2020, the bearish setup failed. From my perspective, with VIX still crushed as of yesterday, the profit opportunity on a break is vastly larger than the opportunity from a bounce because a downside break has at least 5 percent downside and probably closer to 10 percent. A bounce could be brutal in the short-term of days and maybe weeks, but remember the S&P 500 Index futures made an overnight all-time high ahead of the Thursday open. There isn't much upside for stock indexes outside of a melt-up scenario. Beaten down stocks suck as ARKK could rally 20 percent or more if the market stabilizes. When it comes to caution, I'm watching the ARKKs of the market and not the Apples.

For a bearish continuation, the Russell 2000 needs to make a new low. The futures low for this correction is 2127.

ARKK is not at a new low in premarket trading. It's lowest point was $89.03.

I will press the accelerator on short positions if there is a breakdown in the market, but otherwise I'm going to be sitting on a healthy cash position waiting to see how the market opens. I'm also interested to see if more sectors join in the selling, sectors such as consumer staples and financials.

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