MELI has been in a decent uptrend for most of the year and recently has put in a nice high as the markets rollover. It is a volatile momo stock so its a wild trader. The stock looks very toppy up here even after falling 5 bucks from the high on Monday morning up at 70.95. The rising wedge that has formed on the daily makes this look heavy. The gap down today and subsequent close below yesterdays lows tells me that this one has likely entered into a correction and could see at least a 50% retracement of the rally since the start of the short term uptrend that morphed into a rising wedge. That would bring it back to near the 59 level that was a short term low when earnings were released earlier this month. If it cant hold that then the longer term support I highlighted at 56 could come into play.
The market looks like trash right now and while some think we are oversold--I dont. Short term maybe for half a day we can get these low volume rallies but they seem to be targeting 1010 in the next week as a solid target. I dont see how 1040 support is going to hold the 4th time around. The internals and sectors making up the market are just too weak and struggling even more than they were the last time we were at 1040 in the SPX. Nevertheless I still see pressure in this market and if that happens then they will even sell the leaders and darlings that have held up like this MELI.
Buy the Sept 65/60 put spread for a net debit of $1.60.
This is a bit more aggressive of a play but I like the odds that MELI corrects under 60 and if so then this spread stands to at least double. Cut losses on a close above 68.