Super Micro floods the market with $7 billion in new stock — short the dip on ri
Thesis
When a company sells billions of dollars of new stock, it floods the market with shares and usually pushes the stock price down. Super Micro is dealing with this heavy selling pressure right as the broader tech sector is dropping due to a hot 4.2% inflation report. With bond traders betting on Federal Reserve rate hikes to slow the economy down, expensive tech stocks are likely to face even more pressure. This double-whammy of a dilutive stock sale and a tough economic backdrop sets up a potential continuation of the downward slide.
Strategy approach
Build a rule-based strategy that enters short SMCI on the 4-hour (H4) timeframe when the high of the current candle drops below the low of the previous day's session (bearish gap down) and the 10-day RSI is below 40. Exit the position if the price crosses back above the 10-day simple moving average, or place a 4% stop loss above the entry price. Limit the holding period to 15 trading days.