Momentum Names Feel Risky

Momentum names are losing it again today. I had a nice chart to lay out targeting the $40 area for SolarCity (SCTY). I still think it happens, but a $40 target from $48 is more attractive than from $46. In the short time it took me to upload these charts and type out a trade, that is how much SCTY lost in share price.

SCTY Source: View Chart » View in New Window »

The idea being there was both a gap fill and a break of price support. The CCI has completely fallen out of bed and the moving averages are working against the bulls now. I liken SCTY to Tesla (TSLA), which is like comparing Jamie Lynn Spears to Britney Spears: They both look awesome but then personality, or rather valuation, eventually catches up with them. I still favor a diagonal put spread on SCTY, long the January $45 put and short the December $41 put, which was around $2.95 at the time the stock really started to break. (A hat tip to Mr. Stafford, who has been willing to learn about chart patterns from me over the past several months. The student has become the teacher. Or maybe he just got lucky. Still, he deserves acknowledgment.)...193 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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