04/26/23
Nothing beats that new car smell.
Clean, fresh upholstery. New leather. I can almost smell it right now.
It smells like..a terrible financial decision.
There has never been a worse time to buy a new car.
With new cars marked up and overpriced due to inflation and used cars not faring much better, people are keeping those older cars for much longer.
This means repair shops are raking it in, and online car auctions like Copart, Inc. (CPRT) are killing it on the revenue side as well.
I shorted this stock Monday and covered this morning for a quick 21%.
Wouldn’t that have been a good one to hold on to?
Of course, but you can always play the chart with options, which is what I did earlier this week.
Today, I’m breaking down a simple strategy that requires no indicators whatsoever.
Let’s zoom in on Copart, Inc. (CPRT):
This is a clip of the same 4-hour chart, just a bit closer.
And this might sound crazy, but I went short.
Wild, right? Let me explain…
Okay, the first thing I want to point out are the two white arrows up top pointing down at the two candlestick rejections.
Last Thursday, CPRT danced around the $78.58 print, but couldn’t get the boost it needed to make it to the promised land of $80.00.
Nice round numbers are what folks like to see, so from a psychological standpoint, I wanted to confirm this was a sticking point…
And with two equal highs showing rejection, just below, I wanted to see a quick pop above the previous highs followed by a complete failure.
That’s exactly what happened on Monday.
Risky? Yes, if you overstay your welcome.
If anything, this was a low risk entry as a candlestick close above the price we’ve got marked at $78.58 would’ve been where I cut bait.
3:11 Risk/Reward.
My target was at the horizontal arrow — the opening price of Friday’s 4-hour candle.
The reason for this is that the previous candle was bearish, but the follow-up was more than bullish.
I left some cash on the table and trust me, I wanted to stay in.
However, the probability of seeing the price break under the range only a day later was low.
And with a deluge of earnings on the docket — including GOOGL and MSFT — the market could’ve gone either way…
I’ll take 21% overnight any time.
Look for price rejections and fakeouts, be it upside or downside.
This material is not an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed, and is to be used for informational purposes only. Any performance results discussed herein represent past performance, not a guarantee of future performance, and are not indicative of any specific investment. Due to the timing of information presented, investment performance may be adjusted after the publication of this report. There can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this communication will be profitable, equal any corresponding indicated historical performance levels or be suitable for your portfolio.
