SSS - Thoughts on the Short-Side on a Big NYSE Index Day

Published : April 24 2012 at 11:55 ET

An interesting divergence is developing today between the NASDAQ Composite (as a result of big NASDAQ stocks like AAPL, PCLN, BIDU, and ISRG being weak) and the Dow and S&P 500 Indexes. From the perspective of a stock short-seller, this looks like a negative development, but the day is not over yet, and of course AAPL is yet to announce earnings after the close. So far investors appear to be more cautious than optimistic about AAPL going into earnings. F5 Networks (FFIV), which we discussed yesterday as a short-sale target based on a set-up we like to call a buyable gap-up, or BGU, inversion. FFIV has the look of a possible Punchbowl of Death (POD) set-up and within that context the failure of this recent buyable gap-up move of four trading days ago provides us with a short-sale set-up based on the thesis of a POD combined with a failed buyable gap-up move. The stop remains 131.30, adding 1-2% according to one's taste for upside porosity, but with the stock moving below the 50-day moving average today with volume picking up our initial downside target would be the 120 area at the lows of the prior consolidation that the stock formed going into earnings last week. From here we would want to see volume pick up as the stock blows below the 50-day line to confirm our current short thesis on the stock.


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