Here’s my take on some potential rebound trades. Check $TSLA $ARKK and $RIVN (December 06, 2021)
QQQ TSLA ARKK RIVN
I am going to show you some things, kind of like the difference between bounce trades and dud trades, really. What we are looking at is stocks ( NASDAQ: QQQ ) that really come down hard this way as opposed to just kind of drifting lower. Weekend selling, buyers coming in to pick up the stock, nobody really cares too much about it. The buyers aren’t going to chase the stock higher and the sellers aren’t going to just bang the bid and drive the stock lower.
That’s kind of a weak hand thing and, frankly, it’s a healthy dynamic. When you get this kind of pullback it’s really not healthy. It shows that there is something wrong where there are no buyers here, there are a lot of sellers. And then finally, when you get 2 a key moving average support that’s where you find the buyers.
When I look at this, though, I think it’s magical thinking to believe that you are going to get this kind of move, this was just too steep. There is a lot of pain in that chart so you are going to get selling into this strength. And there is no super indication that there are buyers just rushing in here. But this isn’t really what I am talking about. I want to look at Tesla ( NASDAQ: TSLA ) and then Rivian ( NASDAQ: RIVN ) and ARK ( NYSEARCA: ARKK ) real quick.
Now, Tesla ( NASDAQ: TSLA ), this is what is called a hammer pattern. It’s a reversal pattern where, after 3-days of downs, the stock opened up, traded pretty far down, and then has rallied back to very, very close to the high. So the idea is, the stock is “hammering out a base”, so it’s a bullish pattern. So you could buy this stock here, put a stop below today’s intraday low, although, I would even put it down here, give it 3.5 percent or so.
It’s not my kind of trade though and this is why, because there is so much selling here that any rebound, and I guess right now you could say, whenever the stock hits $1,000.00, that’s when you buy it, but this is also in this consolidation phase. So when this stock rebounds it is going to spark a lot of selling as it has before. Every time the stock has come up here, the last couple of times, well, every time, it hasn’t been at this level before, sellers have been coming in.
The stock has been volatile, this is the epitome of institutional selling, this is distribution here. Now, will this distribution turn into higher prices? Who knows? Nobody knows, but this is now testing the 50-day moving average. What I don’t really like about it is, this stock, right now, is still below Friday’s intraday low. So it is still lower, there is still selling into this stock, if there wasn’t the stock would be rallying higher.
Let’s look at a couple of other winners here. ARK ( NYSEARCA: ARKK ), Cathy Wood’s magical show. This is kind of the same deal. It has broken 100.00, now it’s down 5 percent below that. At least you can see here, the stock has been trending down. It gapped down this morning, traded down even more, below 90.00, and then now it’s up where? This is half an hour before the close, this is now at a new high or almost a new high in today’s action. But it is above Friday’s closing price. So at least you can say there is buying there.
Now, I would say the same issue remains with this stock. There is a lot of pain in this chart, there is no way this stock runs up here. People are catching on to this on a lot of different fronts. I have already talked about that, I know I have ticked some of you off but I don’t care, I am just speaking the facts, I am speaking the truth. This isn’t a great stock picker, if it was you wouldn’t see this kind of decline. Sorry, this is something else and it wasn’t, and I will say it, it wasn’t a great stock picker.
Everything ( NASDAQ: QQQ ) rebounded, this ( NYSEARCA: ARKK ) just got more attention, hence more upside, etcetera, etcetera. But a lot of the stuff that is in this thing now is just hype, no money, no revenue, no nothing. And so we see this in a big downdraft here. And you tell me if you think investors have caught on. The stock is down 40+ percent from the high, while the S&P and the Nasdaq are close to all-time highs. So yes, I would say they caught on. Okay, fine, editorial over.
What we are seeing here, though is, at least we’ve got some kind of a snapback here. To where the stock is higher than Friday’s close. Tesla ( NASDAQ: TSLA ) is not. So between these two, I have got to give it to ARK ( NYSEARCA: ARKK ) as far as, if you are buying these crushed stocks, if you are buying these massive sell-offs, then you want the one that is showing signs that it is actually going to move higher. Not that you think, but one that is showing signs and this is showing signs.
Volume is still below Friday’s volume, but again, we’ve got half an hour to go. It wouldn’t surprise me to see volume exceeding Friday’s intraday high. But even if it doesn’t, this is a massive volume spike here. I think this stock is going to go higher here for a trade. Beyond that, I literally have no idea because this is a crowd play, nothing else, what’s the crowd doing?
Now, Rivian ( NASDAQ: RIVN ). This stock has had a heck of a sell-off from top to bottom, 45 percent. And then today, what is it doing? It actually gapped up and then it’s up even more right at testing this 8-day moving average. You can’t look at the 50 or the 200 because it hasn’t been trading that long. So on this stock, it’s right up to where it has kind of failed before.
This isn’t a stock that I would buy right here. It is up about 10 percent today and it’s got a very wide intraday range. So this is, in my view, it is pretty risky. You have got to go into a 15-minute chart to really get a sense of this. And don’t pay attention to these moving averages, it’s a 15-minute chart, moving averages don’t change. It’s 200 15-minute bars, 50 15-minute bars. But you can see, this stock has rebounded or it’s broken through today’s, what was the previous high.
So if you are kind of day trading this stock, you are buying it here, you are probably going to get a nice move to the upside because the stock is already shown you a higher open, a higher close from last Friday. This is how you want to read the tape, and a higher intraday low than here. So we’ve got a higher open, a higher close. A higher intraday low, a higher intraday high. So the advantage is to the bulls here, I think this is going to be going higher from here.
ARK ( NYSEARCA: ARKK ), I think it will. Tesla ( NASDAQ: TSLA ), probably will but this is not as convincing. It is not even up on the day. But also, when you think about it, this has only been a 3-day drop of about 14 percent and it is actually still kind on in consolidation. The other ones have been just getting crushed. So it kind of only makes sense that this isn’t super over-sold. It is testing a key moving average. It is not over-sold, it’s not over-bought, it is just down at the bottom of the channel.
I hope these observations kind of help you start to understand how price action can be interpreted. That’s what I am saying, there are different ways to interpret it but it should all lead you to the same answer, which is, which stock do I buy?
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