CROX QQQ SPY 

I am going back to the well on Crocs ( NASDAQ: CROX ). Last week I noted that Crocs ( NASDAQ: CROX ) wasn’t looking that great. It had cracked down here below the 50, really had a steep sell-off. And my suggestion was, that you are actually looking for a short entry on this stock. A stock is broken like this, and then when you look at the rest of the market and the rest of the market looks pretty brutal too. Then you see a stock like Crocs ( NASDAQ: CROX ) and that’s a stock that you don’t want to be in. In fact, it would be nice to be short that stock.

And then the very next day here, which is today, when the market initially, like for a cup of coffee, went a little bit higher, Crocs ( NASDAQ: CROX ) actually fell and hardly rallied at all before it sold off almost another 4 percent today. So I am just telling you, this is a stock that you don’t want any part of because it has fallen so far, personally, I would not be shorting this stock. But I am not telling you that shorting it will actually be a losing trade right here.

You could see this stock continue to fall down to hit the 200-day moving average. What it’s going to do after that, I have no idea, couldn’t tell you, I’m not Dennis Gartman, so you could see the stock continue to fall. Personally, I believe that the best trade is if you get some kind of a rally up here, and then it fails. This is a broken stock, confirming that it’s broken, but then it does rally. Maybe it comes to the 50-day moving average and that is when it fails.

And so what you would wind up doing is this, I’m giving you your plan upfront, we will say this is an up day, green bar. It rallies back up to the 50, tests the 50, and then the very next day it starts to trade down. You don’t have to wait until the end of the day. You see the stock test this 50-day moving average and then the next day it starts to trade down the other way.

So what you do is, you go ahead and short the stock, and then you put a buy stop right up above the 50-day moving average. Now you have got a really low-risk trade because your risk is limited to where you shorted the stock, versus where you are going to get stopped out at. And that is actually just a very, very, small amount of money. So you are shorting right, you are taking a small amount of risk, and then frankly, you stand to make a lot of money as Crocs ( NASDAQ: CROX ) does a little reversion to the mean, meaning the 200-day moving average.

CROX 

I am going to feature and focus on one stock here and that is Crocs ( NASDAQ: CROX ). Here’s why; I am seeing a LOT of patterns that look just like that and that’s kind of a good tell for the broader market but just focus on Crocs ( NASDAQ: CROX ).

This, right here, this breakdown of 143.00, 144.00, we’ll call it down here, of the 50-day moving average. That was an important event and here’s why, because the stock has been holding, right? Then it breaks down, okay fine. Volume was a little lighter than average, which is almost kind of a bullish sign. But then when the stock started to try to regain the 50 and kind of continue to move up here it wasn’t able to do that.

The rally also occurred on even weaker volume. So this last rally, over the last couple of days, if you want to call it that, it’s just prices that close higher than the prior days, I wouldn’t really call this a rally, occurred on very light volume as well. But now, today, we are seeing selling pressure, and a lot of it right at the 20-day moving average of volume, which, by the way, was sucked up by this big volume bar here.

Watch what happens if I just reduce it. So now, 15-days, we kind of take out these big volume spikes here. And suddenly now, we are looking at much heavier than average volume. So the point is, on a very short-term basis we’re having move distribution than accumulation by far. Not to mention the fact that this stock has run, it’s up over 160 percent in a year. And so this is truly the time that you are going to see institutions taking profits.

As this stock traded down here below the 50, that’s a bearish signal. This move today, on Friday, confirms what we saw here, which was a test of the 50-day moving average and then a failure. So I am looking at this, and this is actually a pretty good short setup. Now, by the time you’re getting this, you are not going to be shorting it today, and I wouldn’t recommend shorting it today.

Instead, I would recommend watching this. If the stock rallies back up to around 140.00, the closer to the 50-day moving average the better. If it rallies up to 140.00 that’s when you short the stock and then you keep a buy stop just a little bit above the 50-day moving average, that way you are only losing money if you are wrong. And you are only wrong if the stock actually regains the 50-day moving average. Anyway, that is what I would do.