As you can see on the $AFRM daily chart, it looks like the stock has run its course through the four market phases. This could mean the stock is back to its accumulation phase, taking a breath before another run up. In my opinion, the declining volume on the daily chart and the buying volume around this 98.48-107.24 range corroborates that buyers want to step in as soon as this accumulation phase proves itself to be beginning, which I believe it already has.
As is visible on the top of the AFRM Daily Chart I’ve included, the number of buyers that step in when the price is in this 98.48-107.24 range is more than triple the volume of sellers. I believe this corroborates my assumption that the worst, in the short-term, is over for this BNPL giant and it is ready to begin its four market phases, once again. I’ve drawn some potential stop-loss/take profit targets on the hourly chart for a short-term swing trade, for anyone interested.
What do whales think? Great question. Here’s the option flow for Whales with an expiry covering $AFRM earnings date in the first week of February.
Notice the strike, premium, and price of the underlying for all the trades. I believe whales are looking for a run-up to earnings. Whether or not $AFRM will have good earnings, or whether or not the stock will have a positive reaction to earnings, isn’t what this is about. This is a purely technical swing trade.
For anyone who wants to know more about this company, @Figos has done a great DD on its growth potential as a company, and it has been contributed to by many members of the community.
My goal on this swing trade is to get an entry as close to the $96-100 range as possible. My profit target is at $110 a share (do not follow this target, take profit or exit your position whenever you are comfortable/uncomfortable) with a stop-loss of $95 a share. I will be swinging options, but these will be my levels in terms of stops/take profits. My goal is to enter 02/18/2022 calls with 0.6 delta (As of the time of writing, the AFRM 02/18/2022 95 C with 0.63 Delta have a bid of $15.60), with good entries in the aforementioned range, and sell BEFORE Earnings. As of now, the earnings date has not been set, but will most likely be the first week of February. I do not expect the existing probe to be an issue on this swing, as it has already been priced in and the results of the probe most likely will not be coming any time soon:
“The BNPL firms under scrutiny have until March 1 to respond to the CFPB’s request, and BofA estimated evaluating the data could take several months. The agency may use information from its findings in a variety of ways, from publishing a white paper summary, to a basis for new rule-making seeking to modify current practices, analysts said.”
The three key things to remember if participating are:
- Good entries in the $96-100 range
- A solid stop loss of $95.00 per share (if swinging options, use your best judgement of percentage stop loss or actively manage your position).
SELL BEFORE EARNINGS Too much unnecessary risk and uncertainty going into earnings, especially macroeconomic conditions, COVID, and the probe.
Something to think about - Square bought AfterPay for $29B last year, and AFRM is sitting at $23B after today’s massacre.
I don’t have an explanation for the price action today though, and am currently down bigly on AFRM calls, so take this with a grain of salt.