It's not going to be a popular idea, but if you were lucky enough to get into a SolarCity Corp. (NASDAQ:SCTY) position at any time between October 10th and Thursday of last week, then congratulations. Now get out. Although you're up anywhere between 8.0% and 52%, SCTY is overdue for a pullback, and there are some hints that today's the day that sizeable pullback is beginning.
If the company name and ticker rings a bell, it might be because yours truly took an honest, unbiased trading look at it back on the 11th. The conclusion then? While SCTY looked like it was bullish enough to make for a great short-term trade, that rally was never going to be built to last. Here we are ten days later, and sure enough, it looks like the SolarCity runup is done, and reversing today.
There are two clues that point to that outcome here. One of them is the fact that even though SolarCity Corp. has been running hard for nearly a couple of weeks now, the buying volume has been drifting lower that whole time. It's going to need growing participation rather than fading participation if the strength is going to keep chugging.
The other clue is today's bar, which actually opened at a new multi-month high, and then faded back into the red. Think of it as a "last hurrah" of sorts, where the last of any would-be buyers file in, but the first of the profit-takers are immediately ready and willing to start filing out. The irony of that event is that the more the SCTY bear/bull balance dips to the bearish side of the fence, the heavier the bearish weight gets as fewer buyers remain interested in catching a falling knife, and as more and more traders become profit-takers, not wanting to give up any more ground than they already have.
You'll also notice the volume behind today's pullback from SolarCity is pretty heavier... heavier than the volume we've seem for most of the last few bullish days. Point being, the bull/bear imbalance may well already be tipped in favor of the bears.
Suggesting anything less than perpetual and perfect bullishness is in the cards for SCTY won't be any less popular today than it was a week and a half ago. But, this was always the inevitable reality. The good news for fans of SolarCity Inc. is, this pullback isn't apt to last any longer than the overheated runup was. Timing is still everything.
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