Introduction
Hi friends,
Today we will take a look at a potential parabolic short setup that might be forming.
Clover Health CLOV 0.00%↑ is a company active in the healthcare insurance industry. They provide Medicare Advantage insurance plans with direct ties to the United States government.
Recently, the stock went parabolic and was up over 100% in just 8 trading days.
Clover Health Financials
While I’m solely looking at the technical analysis for a potential trade idea, I think it is worth looking into the financials in case people are interested in taking a longer term position, either long or short in this company.
At the moment of writing, the company has a $1.66B market cap. Last quarter, the company reached a positive net income of $7.4M for the first time in its history.
Quarterly FCF came in at $44.4M for the quarter.
Total investments for the company currently stand at $228.0M with the company having $254.8M in cash and cash equivalents.
Insider Purchase and New Executive
In the midst of the rally, a Director by the name of Garipalli Vivek bought close to $1M worth of shares. As you might expect, this added further fuel to the fire.
Not only that, but on the 22nd of August, Clover Health announced that Thomas L. Tran, a former CFO of Molina Healthcare, will join Clover Health’s board of directors. Molina is an excellent company, so this is definitely a solid addition to the Clover Health team.
Why Short?
Clover’s stock is currently far above its 10 and 20 daily moving averages. As a matter of fact, the stock has to come down over 30% just to touch its 20 EMA. This is one of the biggest differences between the current stock price and the 20 EMA that can be found in the market today.
With a 15% drop being a touch of the 10 EMA, this would be a great initial target in case we see downside confirmation. Keep in mind, that downside confirmation is necessary to create an optimal risk/reward scenario here.
In case we see a large drop in volume and consolidation between the 10 and 20 EMAs this could become an interesting long setup. As such, there are multiple ways to trade CLOV 0.00%↑ . The company seems to be moving in the right direction fundamentally and the insider purchases are convincing. As mentioned, in case of a consolidation, this could become an interesting long setup as well.
Right now, I don’t have a position as I’m waiting for downside confirmation. Shorting isn’t for everyone and requires active risk management, so make sure this aligns with your overall portfolio strategy.
If you like this post, consider subscribing and sharing it with your friends.
Have a great and profitable week!