The market sell-off over the past few days has been broad-based and ruthless. Sectors hit the hardest include transportation, semiconductors, and software, but individual stocks across the board are either floundering or already behind the shed. Even the top for energy stocks might be in as breakouts have been getting sold into.

The Nasdaq is leading the way down as risk-off appears to be back in full force. Many stocks from my short-sell focus list yesterday like UPST, AFRM, and APPS closed down 6%+ today. I noted in the last letter that “I took profits, now nearly entirely in cash while I wait for stock setups to trigger” and that “it’s absolutely crucial to be patient for proper setups and fight FOMO as reversals can be frequent/ruthless.” That proved to be the case, although it didn’t stop me from getting a bit chopped up trying some trades on the way down.

There’s hardly anything looking good, long or short, so it’s best to be in cash until the smoke clears. Patience pays. Tonight, I’ll cover a few stocks for the quick trader to consider shorting. Let’s get into it!

Index Update

The Nasdaq closed up on low volume on Monday and printed two distribution days right after. A bearish gap-down today left it staunchly between the 21-EMA in blue and 50-MA in white. If the 50-MA fails as support, it could be headed back down towards the lows as this index looks weak.

The S&P-500 broke below both Friday’s hammer-candle low and the 200-day MA in white; I noted these were both key levels and I would turn bearish if they failed. Look for it to regain the 200-day quickly or it could be headed back down towards the lows.

Stock Updates

The energy stocks I mentioned on Sunday including RES, OVV, CHK, and MTDR moved higher earlier Monday morning but quickly sold off when the market opened. The top might be in on energy stocks for now so I’m avoiding.

Broadcom (AVGO) crossed above the $615 buy point and moved higher before fading back in with the market and hitting breakeven stops today. I noted that I took most off the table at $636.

NVIDIA (NVDA) broke out at $270 but fell to breakeven stops last week. Now it’s moving much lower - a bad sign for a market leader.

BRC (BRCC) is one of the lonely bright spots in recent days as it moved up through the IPO U-Turn pattern buy point at $21 on good volume. On Monday, it exploded over 36% higher. I’d sell most if you haven’t yet.

Short Setups

There are a few shorts setups in software that have led the market lower in the past few days, so they can be considered for the quick trader with tight stops. I had SOFI, UPST, and ETSY on my short-sell list in last week’s newsletter but left them out at the last minute as I was running out of space. Shame… I’m considering more frequent updates on this letter for juicy setups that come up in between full Sunday/Wednesday issues. Let me know if that’s interesting!

Etsy (ETSY) broke down from a picturesque bear pennant with smaller and smaller bounces getting rejected at the declining 50-day MA. I caught it today at $126.50 with stops at $130.50. I’m looking for higher sell volume to come in as it was just average today.

Upstart (UPST) broke down from it’s bear flag below the 50-day MA on Monday and continued lower today. This one is really weak, having broke down before most. I’d consider it for a quick trade if it tested closer to $100 and failed, with stops around $101.

Sofi Technologies (SOFI) broke down from the bear flag on Tuesday and continued lower today. If it stays below $9, it can be shorted.

Asana (ASAN) is another weak-looking stock that broke down again after a light bounce. $37 is a tough spot so if it trades up there again, a short can be considered with tight stops.

Lastly, Affirm (AFRM) is in a 5-month downtrend and isn’t getting much reprieve as it was stood up at the declining 50-day. It could get slippery below $39.

That’s all for tonight! If you liked this column or have any feedback about the content, hit me up on Twitter with the link below or respond to this email.

See you back here on Sunday night for an update on our stocks.

Cheers,

Danny Deals