Analysis of Stock Chart on CROX

I need to follow up on the CROX trade because I have had several questions about it. First off, no you do not want to trade based solely on the IV or relative cost of the option position.

You need to do you homework and be smart about the positions you open, those that you take a pass on, and how you manage your risk. It is also true that CROX has sold off the last few days and I did receive one or two "catch a falling knife" comments.


Let's back up and take it from the top. Even with the selling over the last few days, CROX remains in an overall up-trend. For affirmation of my opinion you could always turn to the MarketClub Smart Scan analysis which says:

"Uptrend - CROCS INC (NASDAQ:CROX) - Smart Scan Chart Analysis is showing some near term weakness. However, this market remains in the confines of a longer term uptrend. Uptrend with tight money management stops."

If you look at the above chart, you'll notice that CROX broke out, and has traded back to support. You'll notice that it has pretty well tracked with its moving averages. You will notice a red sell signal triggered a few days back, which may be a signal for short-term profit taking but it probably should not be used as a signal for getting short unless you are comfortable with counter trend trading. Stochastics demonstrates an oversold condition.

So, what's the over all picture?

The primary trend is up. CROX has pulled back to support. IV has pushed some additional value into the options. (See my prior post.) Following the Smart Scan advice, we would want to use tight money management stops for any trade. We might keep an eye on CROX and wait for a buy signal or for it to turn higher before opening a trade, but how you choose to time your entry is up to you.

Just make sure you have a plan should CROX break out of its longer term trend.

Trade well and mind your risk.

Christopher Smith
TheOptionClub.com