EJ's short setup is very similar to NTES's, which was the previous short pick. EJ recently broke below its 200-day EMA on heavy volume, falling out of a base that has been forming for the past several months. As with NTES, I am hoping for EJ to rally about 10% or so to return towards its 200-day EMA, and I would look to use such a bounce as a chance to get short. It is similarly oversold, as it's fallen now for 8/10 last trading days. I also anticipate the 50-day EMA being dragged down towards the 200-day EMA to provide an additional layer of resistance. Based on the weekly chart, if the bears can really get a hold of EJ, I could see the stock getting cut in half from here, plunging all the way back to $8.
In the options, I like the March $17.50 or $20 puts, which could be put into a put spread with the February (and eventually March) $15 puts. Again, I'm looking for it to have a little oversold rally in the short term to set up a better shorting opportunity.
Position: none
Disclaimer: This is not a recommendation and is presented for informational purposes only.
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