CRWD Looking Bearish

Sent a Tweet out 12:06pm ET today that I was shorting CRWD by buying a 8/20/21 240/235 Put Option Spread for about 1.50:

"Shorting CRWD for swing trade. See notes on chart. Details later."

Here's what I noticed today:

• Head & Shoulders with symmetrical timing
• Bearish Engulfing candlestick pattern
• Close below 8ema
• Close below 50sma
• Lower low 2 days ago than the previous swing low
• Bollinger Bands / Keltner Channel breakout
• Blue Ice Failure
• Stochastics mid-range, providing runway to the downside

The chart above is a Daily chart. Some of these observations are obvious and some are not. Let's discuss what needs more explanation. If you have any questions on the rest, please add a comment to this post with your question.

Before we do though, I want to point out I'm a technical trader, not a fundamental trader. So, even if the company is doing well and has a bright future (I have no idea), it doesn't matter to me taking a short term trade. The charts of even the best companies have occasional pull backs. This chart is telling me this stock is about to have one.

The neckline of the Head & Shoulders pattern is very slanted. A horizontal neckline would be ideal. But I've seen plenty of slanted necklines still turn into winning trades. The two thick horizontal line segments at the top show the distance between the head and the tops of the shoulders. Having the same distance from the head to the left shoulder and the head to the right shoulder would be ideal. We have exactly 9 candles to the top of  left shoulder and 9 candles to the top of the right shoulder. Can't get more symmetrical than that. We actually broke through the neckline 2 days ago but I just noticed this chart today.

You can see the Bollinger Bands / Keltner Channel breakout by noticing the light blue squiggly lines have crossed the darker blue squiggly lines from the inside to the outside. This is a strong indicator that whatever the current trend is at the breakout will continue for 5 -7 candles on average. The BB/KC is not 100% accurate, like every other indicator, but I have had good luck with it. Bollinger Band's are a function of Standard Deviation. The Keltner Channel is a function of Average True Range.

"Blue Ice Failure" is a pattern I learned from Steven Bigalow of candlestickforum.com. It means that price breaks through the 50sma, then reverses and tried to cross back over the 50sma but fails to do so, and continues downward. Its too early to tell if we have that pattern, but we certainly do have the beginning of it.

The first target, for me, on a Head & Shoulders pattern is half the projected measured move. But we already hit that the day of the breakout. So, I'm going to name the second target as the "first target", which is the full length of the Head & Shoulders pattern projected measured move. This is about 200.

The next target is the 200sma, which is the thick, white, diagonal, squiggly line. Read my profile to get a link to a description of all my indicators. This is estimated to be about 210, but its impossible to know exactly where the 200sma will be when price gets down to it.

Today at 11:52am ET I bought a 8/20/21 240/235 Put Option Spread for 1.33. If this trade goes as planned, then this spread will be worth 5.00 at expiration this coming Friday.

Summary:

Entry: $133

Target: CRWD = 210

Stop: None needed with an affordable option.

Risk: $133

Reward: $500 - 133 = $367, not including commission.

R:R = 367/133 = 1:2.76, which is very good.