I never heard of this stock before a few months ago, now I am looking at charts of it all the time. It was a short presented by Dave Kranzler in his short seller’s journal (SSJ). I am a guy who thrives with understanding a lot of the macros of the world right now, but no one can know everything. I have been pretty damn accurate with my 2023 macro forecast. The one thing I didn’t really see was this AI thing, which has my tech stocks hitting the snooze button until that pops. I even put a page together where I’m charting all of the negatives right now which leads me to a default bearish position on all markets right now.

Within my bearish case, I cannot see how someone is spending 8% on a house right now where in many markets, you are still seeing at or near all time highs in prices. I use the macros to find WHERE I want to look. The technicals to me are a crap shoot. It is not a voodoo science which will 100% predict the future. It is a divining rod of sorts, which will get you NEAR the water – but not certain. Brady uses a model he calls FIPEST, and with that, I can see why he does this. He’s trying to build points of confidence. I heard him say perhaps a year ago he sold all of this real estate – he’s that bearish on everything. He didn’t just draw a pretty chart, he liquidated I think he said 3 houses. He’s not doing that because he saw an ascending triangle formation!

With the technical stuff, it’s essentially based on the psychology of fear and greed. You tend to see these patterns over and over again. Well – these patterns are a predictor, of sorts. If you back test this stuff, you will find that perhaps some of these are 60-70%. Which, is actually pretty interesting if you cut the losses quickly on the loser, and run the thoroughbreds run.

But does it work? I have found recently that I think certain items tends to follow the psychology a LOT more than others. I was ASTONISHED at how I saw Gareth Soloway call Bitcoin way back. This dude pretty much nails the dollar on these things. Is bitcoin then more susceptible to greed and fear? Perhaps. With BLDR, I had noticed a lot of the tech items I’d be looking at, all seemed to work on the way up for them. Given the macro environment, Dave’s pick for them as a short, and the possibility this is more susceptible to greed/fear than other stocks, let’s take a look!

I spent some time over the last few days looking at BLDRs charts – here and there. I built out a bunch of charts that shows that it seems to be more sensitive to technicals. Could this work on the way down, as it worked on the way up?

Let’s look at the way up

In the first one, you can see a typical run up, pull back, and bull flag up. It went to about the .5 fib level. It has been pretty close to a measured move, but not precisely. Idea is, there was some meat on the bone with the bull flag here.

With the next item, you see how the golden cross here had strong rallies. Only when a death cross happened did you see any kind of pull back move sustained. Meaning, if you bought at these places, and sold at the death cross, you would have done well. Should a short wait until a death cross down for confirmation? Probably. I did not.

With the third installment, you can see it recently had an arc. Also – a cup, small handle, and measured move from the bottom of the cup to the top, then placed on the flag.

If you measured it from the top of the cup, it’s about today’s price.

With the next chart, you can see how this has built to a blow off top.

I did a chart like this for gold on the way down awhile back. I had noticed the angles were getting lower and lower on the way down using the 50dma. With this, you can see how the angles of each move are getting steeper – which then resulted in a moon. To me – this is probably about as text book as you would see with a blow off. Not for certain, but dayum, look at that?

With the 5th chart, I only made note of the gap. Take note of this. It could end up one day having a gap down for an island reversal.

This is an island reversal, just flip it upside down.

With the 6th chart, let’s look at where RSI started getting overcooked before, and what happened right afterwards. I’m using the WEEKLY MACD here to show how stupidly overcooked this is, as we are in or entering a recession. It’s dangerous to SOLELY use RSI, but I like the idea of buying low and selling high. The daily RSI helps me a lot, but the WEEKLY one is telling me where we are in the game. Just because something has a high RSI doesn’t mean it will come back down to earth anytime soon…

Which I pointed out with BLDR. During a surge in housing prices up, this RSI stayed at 65-70 for quite some time. My BET here is that we aren’t in the surging housing prices market. If price remains sideways here or slightly moves up, RSI can start to recede more. This will setup divergence – which hasn’t happened yet. But if you look at the last time RSI was this high, it had a rather strong pull back. What is of interest though, is on each of the last 3 pull backs, the down move was deeper. To me, this suggests this move is going to be substantial to the downside.

I didn’t add Elliot Wave here, but you can see with the 2nd red dot, that could be a 1, the move between dots 2 and 3 is the 3 wave, and after the 3rd red dot, it’s the 5 wave. To me, I would start to expect corrections.

So now I’m just starting to scratch the surface with the turnaround. IF this is a reversal, you might want confidence. If I was daily trading, I’d look at the MACD for confirmation of getting out. We have it.

So if I was to exit, are there any pattern structures I’d look for? Let’s take a look at a possible bull trap as well as a bear flag.

In the final chart here, I am making a DIRECTIONAL call using macros, an expert opinion, and technical analysis. Am I right? Who the F knows. This is not crystal ball stuff I’m doing. It’s probabilistic. More data provides more confidence.

What could increase my confidence?

  1. Price goes down, of course. If it hits around $123ish and stalls out, that could also be a double top reversal. If this starts climbing WITH VOLUME, over $124, I am either blown out OR it’s a false breakout. Either way, I have puts and shorts and at some point you go into cash preservation mode. To me, decisions need to be made at $124-$125.
  2. Divergence with MACD
  3. Gap down for island reversal may put a hard cap on $95 as top of resistance in the future.
  4. 25 basis point hike in June. The juked the labor numbers, in my opinion, to provide cover for more rate raises. You have to remember that this administration WANTS more affordable housing prices. Until these bubbles are popped with demand dropping off a cliff, I would expect more pain.
  5. Continued decline in housing sales
  6. Continued buildup of inventory of builders
  7. Unemployment rising to signal recession
  8. MSM gaslighting on “recession” to me would be a tool they use near the end to slow spending by the herd and with this, NOW a stage can be eventually set for a pivot. The talk today is “strong jobs numbers”. This is the ONLY data point I can find that supports any market still standing up.
  9. Druckenmiller’s prediction of a stock market correction by end of June. Even Buffet is sending out warnings. Everyone is telling you bad things are coming. We could have an 800 point down down day at some point, and it’s unclear how ANY stock with RSI over 70 isn’t sold hard. This could literally happen on any day this month.
  10. Guidance by company to reduce earnings for the coming quarter

The play

So where does this leave me? I did some projections. IF my directional call is correct – and it is simply a symmetric move down from here over the next 50 days or so, this projects out to be about an $80 stock on August 18th.

I have puts at:

  • $85 Aug 18th (x5) for $4.50 = $2,250
  • $90 Aug 18th (x7) for $3.30 = $2,310
  • $110 Aug 18th (x10) for $4.60 = $4,600

I’m hurting on the $85/$90 and should have rolled them to a higher strike price, but I’m still navigating when to do that. I also have 100 shares short of the stock which was a time hedge on the 85s/90s. Assume the stock hits $87, my 85s/90s expire worthless. But 100 shares short at $116.59 has me with $2,959 gain to offset some of those losses and my $110s would have me overall profiting about $17k.

I did a deep analysis here on what the pay offs are. To me, I want anything below $105, but given the amount I’ve risked here, my desire is for this to perhaps hit $70 or even $60. My model at $65 stock has this at a $68,499 winner.

So – does this stock behave on the way down, like it behaved on the way up and follow TA? We shall see. I have strong conviction in this until BLDR hits $125 or so, at which time you have to realize these markets are less and less real every day, so why would it stop at $123?

None of this is financial advice, only observations meant to record my thoughts, perform analysis, and let others at home play along.

While I am not “hoping” for issues, I do see problems coming. I believe my biggest risk here is time, and I’m early. What I might do if this continues up is take what I can from the sale of these and roll it into longer dated puts. Most see H2 2023 as a shit storm. Wondering if this happens mostly during earnings season for Q2 in July/August which starts the markets lower. My contention is that a near term catalyst is they need to fund $1T in treasuries soon, which could take rates higher, which – may entice a lot of people into rolling profits into 5% notes during the storm. To me – the bond guys might be chomping at the bit for some high rates about to come so they can buy in there. I believe this might be the catalyst to finally take the air out of many of these stocks, but it’s going to take some intestinal fortitude to get there.

Note: what I’ve also seen a bunch the last week or so is that the stock is crushed at open, then you see it levitate up during the day. I have no idea who keeps buying these dips. But there is clearly a seller’s appetite at open every day.

You can see with the current put to call ratio we might soon be headed a bit lower. This could start in the next 1-2 weeks – but how much upside could there be with FOMC soon? I can tell you, I don’t think 25 basis points is baked in, and at 8% mortgages for a lot of buyers right now, I can’t see how this is good for house buying.