There comes a time with most stocks when you can have too much of a good thing…
And if you’re not careful, it could cost you.
Just look at UPS.
For weeks, the stock has been rocketing on typical holiday delivery cheer.
But the run is also nearing its typical year-end drop, too.
In fact, if we take a look at the last three years, there has always been reason for excitement. A boom in online shopping has led to big demand for shipping, which is where UPS and even FedEx come into play.
But look at what typically happens as the holiday cheer wears off.
The stock begins to die short after on the death of catalyst.
Granted, the 2016 sell-off was a bit more severe with a 2,100-point drop on the Dow, but look at what has happened in previous years after a similar run to what we’re seeing now. It has a tendency to drop about $10 a share each time.
We expect to see the same pattern play out again now, especially with oversold momentum metrics (RSI, MACD, MFI) screaming, “Sell me.”
Either short the UPS stock or buy an in the money put option going out to February 2017. We don’t expect for the UPS rally to last much longer.