Trade Alert: A Winner Returns, A Rally Fails
A bullish re-entry in a previous biotech winner, plus a bearish options bet on a premium consumer brand.
Turning Winners Into Re-entry Candidates
The easiest way to lose a good setup is to stop watching a stock after a successful exit. Closing a position frees the capital, but it shouldn’t erase the name from the process.
We recently used OpenAI’s Codex to automate another part of our workflow. Each week, after we publish our Exits post, Codex reviews every fully exited winner and checks that each optionable U.S. name has the appropriate Chartmill alert—in this case, our Trend & Consolidation alert. Partial exits don’t count.
The purpose is simple: when a former winner clears our technical and fundamental criteria again, the alert brings it back into our review queue immediately. We can then price a fresh trade instead of relying on memory or treating the new setup as an extension of the old one.
One of those alerts fired Friday on a biotech winner we fully exited the previous week for a triple-digit return. The stock is back above its rising 50-day EMA, its RSI has reset to the low 50s, and it does not appear on our new bearish screen, “Bearish Rally Failure”. Monday’s bullish trade is a fresh position in that former winner.
A Rally That Couldn’t Repair The Trend
Our bearish candidate came from the Bearish Rally Failure screen. That screen looks for liquid, optionable stocks below their 20-, 50-, and 200-day moving averages, with those averages bearishly stacked, but whose RSI has rebounded into the 40–55 range. In other words, the stock has rallied enough to offer a potentially attractive entry without repairing its trend.
Monday’s candidate is a premium consumer brand with a strong balance sheet and a still-respectable fundamental rating. Those qualities can make a bounce look persuasive. What makes this setup bearish is the failed trend repair: revenue and earnings have deteriorated, price remains below all three key moving averages, and both its short- and long-term trends are negative.
We’re using defined risk on both sides: a long put spread to profit from renewed downside and a short call spread, capped by a protective long call, to help finance it.
Full details are below on both trades, including the maximum amounts we’re willing to pay for them, and the exit orders we plan to place immediately after they’re filled.
Today’s Multibaggers Trade
Obesity therapeutics / commercial recovery theme
RSI: 53; Chartmill Technical Rating: 7; Setup Rating: 7; Fundamental Rating: 6.
