One day closer to that short setup on CBOE Holdings (CBOE) (December 15, 2015)
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The Fed reports whether they’re going to hike interest rates tomorrow. I think with a CPI that actually showed some inflation, even though we don’t really see it in the commodities, or the basic materials, or the metals and mining index, still the CPI showed some inflation. That’s going to give the Fed good ammunition to say, “We’re raising rates.” So that will be good for financials, for banks. Because when money costs something then all those folks who take in deposits can loan it out and actually jack up rates a bit more. So CBOE is a financial stock but they don’t really do that, do they.
So here’s the thing, I mentioned this definitely yesterday, it might have even been last week but I don’t think so; I’m looking at this as a potential short, because this was in a channel here, a really good channel. Then you get a breakdown (if you haven’t looked at last night’s video please check it out because this is just the next in a series). It’s kind of like Homeland, only nothing like it, no Brody here. So you get a breakdown and then a rally back up where? Back up to this breakdown, this is a big 3-day reversal, and this pattern here, this is a “star”. You could say a “shooting star”,but it’s actually not really for you candle stick aficionados. But the bottom line is, this was where the stock had found support. Well now you’ve got resistance, you’ve got more resistance over head.
So what I’m suggesting you do is, watch how this stock behaves tomorrow. If it rallies up a bit more the idea is you want to short in to that rally. Wait for the stock to roll over a little bit, but you short in to that rally. And then wherever you short you put a buy stop slightly above that. I don’t think there’s much of a chance of this thing blasting right through all these levels. But just to short the stock because Dan said, “Hey, this might be a good short.” That’s a recipe for disaster. You’ve got to manage your risk.
So the idea again is, you look at a broken stock that rallies up to the point where it broke, and then as it falters, that’s when you short. You don’t want to short a stock that’s broken, that’s already falling down a lot, because at some point the guys that were smarter than you, who shorted from higher levels than you, are going to be covering, they’re going to be buying. You don’t want to be shorting stock to those guys.
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