January 8, 2013 (1:15 pm)
Boeing: Three28Capital took a short position in BA this morning. We had highlighted Boeing as a potential short when it rose above multi-week rising wedge. The shares plunged yesterday on news of fire on a new 787 plane, but bounced off the lower trend line. We took a position this morning when it sliced through that lower trend line. The rising wedge has a $5 target move to the downside.
SodaStream: We took a short (as well as a put option) position in SODA based on negative divergence on both the RSI and ChiOsc. This indicates that the shares are rising on decreasing momentum, and is a bearish signal. We took the position as it reached the top trend line of a multi-week rising channel and entered oversold conditions. We sold out of both positions for a 30% profit on the put option as well as a 7% return on the short position (during 4 and 3 trading days, respectively).
Netflix: NFLX has been forming a multi-month rising wedge that is compressing tightly here, just as the RSI is signaling negative divergence. On a break below the lower trend line, we’ll likely take a bearish position. If the shares are able to break out to the upside, we’ll likely wait to take a bearish position when it falls back within the wedge (known as a ‘false breakout’).
Google: GOOG has been trading within a well-defined rising channel since early November. It has since formed a three push up pattern (forming a rising trend line with the first two highs, and failing to reach that trend line during the third push up). It has also formed negative divergence on the Chi-Osc. We’re waiting for a break below the rising channel, as happened during a similar scenario in mid-October, before taking a bearish position.
Bank of America: BAC has also formed a well-defined rising channel since early November. It is nearing the bottom trend line with negative divergence on the RSI and ChiOsc (decreasing upside momentum associated with rally’s). Will support at the lower trend line hold? We may take a bearish position if it does not.