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Friday, July 16, 2021

It is extremely bullish but I'm bearish

First of all, if you don't know yet, COVID mRMA vaccine company, Moderna (MRNA) will be added to S&P! This is really fantastic news for this small biotech company and understandably the stock is going crazy in the past two days. I'm glad I have opened a long term call position for it, which is already more than double just within a few weeks time. But this move is a bit too fast too soon, quite overbought due to the overaction to the great news. I bet it will cool down soon, just like what was done to TSLA last year when it was added to S&P. I think there is a high chance that MRNA currently trading at $287 will come down towards $250 in the near term.  

Now let's look at another high flying stock, the famous Amazon. If you haven't noticed yet, AMZN has broken out to its all time highs lately. This is really a very bullish price action as shown on its chart. Back in 2017 when it broke out, it added 1000+ points in the following year.  Then it broke out again after a 2 year's sideway move, adding another 1000+ points within months. So this time, after it is also breaking out from its long term sideway move, it is certainly extremely bullish TA-wise, right? But why am I shorting such a bullish stock in the past couple of weeks? Well, in contrast to the previous two bullish breakout that was supported by the momentum, this time the breakout is not so much supported by the momentum, which suggests to me that it will have some difficult time holding up the breakout. For the very near term, I was targeting that it should be back towards the 3500ish support, which is what it is doing right now. The big test will be its next earnings report on Jul 29. If the support holds, it will have a great time ahead. But there is also a chance that it may back down below 3500. If that happens, then this is a fake breakout, which will bring it back down towards 3230ish again. 

In other words, its TA is not so strong at the moment and maybe it is premature to be outright bullish for it before earnings. 


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