Here’s my take on Shake Shack (SHAK). (May 02, 2019)

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SHAK OLED ANET SHAK 

Let’s take a quick look at Shake Shack ( NYSE: SHAK ) here. A lot of these stocks are actually down quite a bit on earnings, like Arista Networks ( NYSE: ANET ), a big, big move down here. But if we are just looking at Shake Shack ( NYSE: SHAK ), the stock is up so much, this is what I was kind of expecting, I’ll give you the upshot here; if you are long the stock already, congratulations, consider selling into earnings. Take at least half off the table tomorrow. I have no idea whether the stock is just going to reverse but I don’t really think so. I think, from everything that I gather, the earnings were really good. There is a lot of upside, a lot of positive momentum in the stock.

So my sense is, we are probably going the see just a perpetuation of this move in between these lines. You’re up here, sell here; wait for the stock to pull back a bit and then rebuy those shares back in the low 60s, 63.00, 64.00, 62.00s, 61.00, wherever it goes to. You can’t plan too far ahead but be selling up here, be selling here, be selling here. And then do the opposite on the bottom. This has actually been kind of a pretty predictable chart here. So when the stock gets back to this area here where it would be at the black line on the bottom, that’s when you are buying. You can already see the stock doing that in the after hours. Where it was up to almost $70.00, up to 69.00, and then that’s it, and now the stock is down from that, 3 percent.

By the way, this is why you don’t want to be trading in the badlands of traders after hours because you stand the risk of buying at the high and then selling at the low the next day; or selling at the low or shorting at the low and then having to cover when the stock reverses. In this case, I am just pointing this out; it is one of many stocks that are going to be trading tomorrow.

And again, to emphasize and then I will get out of there. I don’t like to short uptrending stocks. I just think that if you are shorting and uptrending stock essentially you are saying I am smarter than the market. Instead, what I like to do is, I like to short a stock, it’s almost like it looks the opposite of this, you get a nice uptrending stock like this, it moves up and then it moves down. Short it, no, I am not shorting it, I am not going to short it.

Here’s the 50-day moving average and then at some point, by now you know the 50-day moving average is starting to roll over, and then at some point the stock rallies, buyers are coming in deciding this is the support line here, it’s time to buy the stock. But there is not that many of them because guess what? At the same time that they’re buying a lot of folks who bought up here are not particularly happy that they bought up there so they’re looking to sell. So there is a lot of selling pressure here.

What I like to do is wait for the stock to test what should be a breakout level and then fail. THEN you can short the stock and have a buy stop just above this level. Or wait a bit more, wait for it to fail and then come back and then do the same thing. You short the stock and then do this. So basically what we are looking at is, we don’t want to be shorting winners and we don’t want to be shorting losers. We want to be shorting winners who may have seen their better days and are starting to show that they are starting to print lower lows and lower highs.

That is why I am saying; I wouldn’t be shorting this stock anticipating a high. But for a day trade, screw this. Just look at the intraday action; know that it is generally in an uptrend and that is kind of a low probability trade shorting into an uptrend. But if it is an overbought stock that is just up so much in such a short period of time, once again just think back about the diagram that I just drew I wouldn’t be shorting this. I might consider shorting that, where then you get stopped out. Or I might consider shorting that, which you are not getting stopped out, now you are making a little bit of money.

It is the same principle; where what you want to do is you want to be able to identify an, Oh crap, I’m wrong level. And you can’t really do that if you are shorting stocks that are trending higher. I am not even going to explain it to you, we’ve gone 6-minutes here. You can’t do an, Oh crap, I’m wrong, and this is why: Stop level, when you are shorting stocks on an uptrend, all you can do is say, “Okay, this is as much pain as I can take. I have got to get out of here.”

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