Bear Flag in CREE

[Steven Place]

This is a post-earnings followthrough trade in CREE.

After getting slammed on earnings, the stock has been in a consolidation range for about 2 weeks. This is a classic bear flag pattern, with targets in the 50s.

 

Straight up put buys would work here, but you could also consider a bear put spread. The reason this strategy looks attractive is that you have skew in your favor.

Here’s the trade I like:

• Buy Oct 55 Put
• Sell Oct 50 Put

Debit: 1.55

A move above 58.50 invalidates the flag pattern– that would put your risk at -35 per spread.

Initial target is the rising 200 day moving average, currently around 51.25.

 

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