021. PIGGISH PLAY - Short Cardlytics (CDLX)Cardlytics (noun) - the study of companies that create a purposefully enigmatic and cool-ish-sounding name to attract investors without the need for a profitable business model.
Cardlytics (noun) - the best possible company to short on Monday afternoon before it announces its quarterly numbers after the close.
What does Cardlytics do you might ask?
They develop software to help marketers identify buyers. Hmm, sounds like they data scrape the world wide web for your personal info without your approval. In any case, whether you want to chalk up their 70+ dollar/share valuation to their name, their peer group of obscenely overpriced cloud stocks or their state-of-the-art privacy-violating technology, I will be shorting them on Monday.
The reasons are three-fold:
1) The last three reports not only missed Wall Street's increasingly low expectations, but have been decreasing steadily in bottom-line growth. If you don't feel like hovering over the icons above, the last three quarterly numbers are as follows: 0.12/share, -0.51/share and -0.73/share. Expectations for Monday's report are -0.60. Astonishing stuff.
2) The price action following the last three earnings reports are shockingly logical: it gaps down severely each time.
3) The vortex indicator at the bottom seems to predict this particular stock's price movement reasonably well. Vortex can often give false positives, depending on the timeframe used and the underlying security's inherent volatility (true range).
Anyways, when you calibrate the vortex so that it does not give many false positives, it can be a very useful indicator in certain situations. As far as the data captured above shows, there have been three occasions where the VM- (orange bearish line) crosses over the VM+ (blue bullish line). All three crossovers resulted in either new downtrends or solid continuations. While it has not officially crossed yet, it is close enough such that a standard Cardlytics-type of ER could finish the job - a la signature down gap.
The entry and exit points are quick and to the point. This is a short-short, and plan on holding the options until Tuesday afternoon. I'm not a huge fan of holding through the election, but if there's a large enough gap into Tuesday, and the price action closes at the LOD, I might reconsider.
The one unfortunate part about this trade setup is that Cardlytics has already formed a steep down trend over last several sessions. The market is weakening and it will be tough to get a pump in before the ER call given what happened on Thursday.
However, there are two silver linings:
A. The bounce at the end of Friday's session (suggesting potential for a brief bullish continuation into Monday AM) and
2. The market is almost exclusively filled to the brim with dumb money that suffers from short-term memory loss.
On that note, it would be awesome if this thing managed to pump a bit to lower the put premiums. Now for the pig-specs:
Pig Plan:
Equity:
Wait to see if this stock gets a pump in the AM session on Monday. If so, look to fire the beam cannon around noon before entering a short position at the stated. No reason to short it too early, knowing the likelihood of a continued pump into the report. Conversely, you want to get in before there is any potential market-wide down-move.
This is why I trade options.
Options:
I plan on buying puts with a strike of 70, expiring (11/20). While these are expensive and on the safer side for my piggish style, they offer the most value compared to the pricing of farther-out strikes. I don't foresee this being a blockbuster play unless you hold through the election, which is up to you.
Ehh, maybe it could be a block-buster-bag-hammer if it gaps like it did in March. I mean, anything is possible when you name your company after a Webster's-defined financial scheme.
- PigLytics Data Scraping Co.
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