AFTERPAY (ASX:APT) potential short

Jan 23, 2021

APT appears to be overextended to the long side and may be due for a slight correction.
Reasons for this evaluation:

--> Solid Bearish Engulfing candlestick pattern has occurred (Bearish reversal)
Last 2 bearish engulfing patterns along with an overbought RSI resulted in a reversal. This indicates a higher probability trade setup.
--> RSI is moderately overbought (As of the 22st @ 66.59)
--> ATR is at record highs
Each new major ATR high has result in some form of correction whether small (5-10%) or large (100%+)
--> Other Large Cap stocks on the ASX such as BHP,RIO,FMG have also provided bearish signals in the last few weeks and an overall market downtrend can support this evaluation

Reason that oppose the success of this evaluation:

--> APT as a single stock has a tendency to follow fundamental analysis rather than technical
This includes being extremely responsive to news catalysts, positive forecasts and more
--> Positive news reports in regards to tech and software can positively effect APT

**Any Supporting ideas that can improve the analysis of APT are all welcome

Feb 1, 2021

Trade closed: target reached

This current analysis was a success after a 8% move! This trade has potential for a further down turn due to factors such as a potential correction and other negative news. However the piercing pattern that occurred yesterday indicated the possibility of a minor price reversal therefore causing me to exit the trade in the short term in order to find another swing.

I do however believe there may be another drop prior to earnings. Which i will be observant of. This belief is supported by the ATR which is still severely overextended as well as the RSI still hedging an overvalued range.

Feb 2, 2021

Note

Great exit choice for the trade as APT ran up 7% today!! Gotta love candlestick patterns! Piercing pattern was a grouse warning sign