Description
NKE has now rejected the 175 level for the third time, now I am tracking this Descending Triangle consolidation pattern.
This could be a Double-Top pattern in the making, although the Double-Top is notoriously difficult to track, and nearly never confirmed until long after is has finished it's formation.
Evidence indicative of the usual Double Top:
What, in picture, appears to be a "Descending Triangle" has highly irregular volume throughout and could potentially be portrayed as a Falling Wedge.
The Descending Triangle has bearish implications, while the Falling Wedge has bullish implications.
Although the volume displayed is not conducive to either formation, it could be explained by high volatility in the indexes.
With these things in mind, I believe the best position to put on is a 3-month Straddle.
The options market right now is implying about a 14% move in either direction in the next 3 months, so any expiration beyond 146 or 194 would be profitable in that time period, with the last potential support being at 143 for the downside, and all-time highs to the upside.
I, however, will be putting on a directional play based off of where I think the indexes are heading:
Long Put
Levels on Chart
SL > 175
PT : 150
*Stops based off underlying stock price, not mark to market loss
The Trade
BUY
01/07/22 155P
R/R & Breakevens vary on fill.
This put generates a good breakeven in advance of the 145 support if held until expiration.
If you would like me to build the Straddle or build a Strangle, just ask.
The Strangle will create a cheaper position, but push the breakevens further away from the current stock price.
As always, time will tell
Manage Risk
Only invest what you are willing to lose
NKE has now rejected the 175 level for the third time, now I am tracking this Descending Triangle consolidation pattern.
This could be a Double-Top pattern in the making, although the Double-Top is notoriously difficult to track, and nearly never confirmed until long after is has finished it's formation.
Evidence indicative of the usual Double Top:
- Two tops at approximately the same level, but more than a month apart
- Somewhat less activity on the second advance than the first
- Dull or irregular, rounding-type of recession between them
- It is noted that should a small H&S or descending triangle occur at the second top, long commitments should be protected with a tight stop, or switched to a more promising chart picture.
In NKE's chart,
- we see two Tops at approximately the same level (within 3%), and approximately 3 months apart, which is a strong indication that this is not a normal congestion or consolidation pattern.
- Slightly more activity can be seen on the second advance than the first, and there is distinctly low activity throughout the entire pattern.
- The recession between the tops marks one of the only increases in activity in the entire pattern, taking place perfectly at the last known resistance around 145, and marked with a large gap down following the earnings report on 23SEP.
- At the second peak, NKE is currently undergoing some type of consolidation that appears to be a descending triangle with irregular volume.
What, in picture, appears to be a "Descending Triangle" has highly irregular volume throughout and could potentially be portrayed as a Falling Wedge.
The Descending Triangle has bearish implications, while the Falling Wedge has bullish implications.
Although the volume displayed is not conducive to either formation, it could be explained by high volatility in the indexes.
With these things in mind, I believe the best position to put on is a 3-month Straddle.
The options market right now is implying about a 14% move in either direction in the next 3 months, so any expiration beyond 146 or 194 would be profitable in that time period, with the last potential support being at 143 for the downside, and all-time highs to the upside.
I, however, will be putting on a directional play based off of where I think the indexes are heading:
Long Put
Levels on Chart
SL > 175
PT : 150
*Stops based off underlying stock price, not mark to market loss
The Trade
BUY
01/07/22 155P
R/R & Breakevens vary on fill.
This put generates a good breakeven in advance of the 145 support if held until expiration.
If you would like me to build the Straddle or build a Strangle, just ask.
The Strangle will create a cheaper position, but push the breakevens further away from the current stock price.
As always, time will tell
Manage Risk
Only invest what you are willing to lose
Trade active:
Filled @ 2.45.
Trade active:
Earnings AH tomorrow, exciting stuff.
Trade active:
Closed 75% of position today, reducing risk before earnings.
avg fill @ 5.17, +111%.
avg fill @ 5.17, +111%.
Trade active:
Closed out initial position and rolled it back and up to
12/23 167.5Ps @ 2.55
12/23 167.5Ps @ 2.55
Trade active:
Hit a fire sale on additional 167.5Ps today, new avg fill @ 1.28
Trade active:
In 1/21 162.5Ps filled @ 1.71.
Trade closed manually:
Filled @ 4.45, +102%.