December — usually one of the best months for stocks — has been an absolute disaster this year.

And as 2022 comes to a close, some big moves are happening in the markets…

But if you know what to look for, this is to be expected…

It’s not uncommon to see some exaggerated price action during the last few days of the year.

Tax loss harvesting, trading volume, and trader sentiment all play a role in the way stocks trade heading into the new year.

In other words, traders and institutions are rapidly repositioning their holdings — which means we’re getting some wild moves in individual stocks.

With that in mind, today I’d like to highlight a few setups that are catching my attention this week.

Keep reading and I’ll show you…

Tesla Inc. (NASDAQ: TSLA)

TSLA has been on top watch this week as the selling pressure continues to mount…

So far this month, the TSLA chart hasn’t been able to find any support — the stock is down a whopping 38% in December!

Most are attributing the downside to CEO Elon Musk’s acquisition of Twitter, which has pulled his focus away from TSLA.

While this is probably accurate, I think TSLA has been overvalued for a long time. It was waiting for a negative catalyst — like the CEO spending much of his time on another company — to re-rate the stock more appropriately.

Then, news of a planned output reduction at the company’s plant in Shanghai, China added fuel to the bearish fire.

That said, when a stock is down nearly 40% in a month, I’m looking to play calls to the upside. Chasing the downside has much less potential.

And it looks like TSLA might be finally perking up for a bullish reversal…

Yesterday, the stock was up as much as 4% intraday — the first green day.

When I saw this, I bought some calls on a competitor…

Rivian Inc. (NASDAQ: RIVN)

Instead of buying calls on TSLA, which would’ve been the straightforward move, I decided to trade RIVN as a sympathy play…

Now, what’s a sympathy play?

A sympathy play is when you buy a stock in the same sector as another stock that’s making a big move in an attempt to catch a delayed reaction.

In this case, my thought is this…

If TSLA is about to make a bullish reversal, it could bring other EV companies with it. 

And since RIVN is one of TSLA’s most notable peers in the sector, I bought RIVN 12/30/2022 $18.50 Calls for $0.22.

I’m hoping to sell these calls on the first green day for RIVN today, catching a potential bounce from TSLA.

ProShares Bitcoin Strategy ETF (NYSEARCA: BITO)

Cryptocurrencies — especially Bitcoin (BTC) and BITO — remain near the top of my watchlist.

I think the entire crypto sector is holding on for dear life at the moment.

If we look at the big picture … BTC dropped from above $20,000 to under $16,000 following the news of FTX’s sudden collapse.

But I think there’s a lot more downside in store for the crypto markets…

While there’s not a huge move happening right now (BTC is consolidating under $17,000), a major flush to the downside could occur at any time. 

In other words, one big piece of bad news could send crypto into a bearish tailspin and lead to some serious capitulation.

And I don’t wanna miss that move when it happens, which is why I’ve built a sizable position in BITO puts. 

I have contracts expiring on January 20 and March 17 with a conservative price target of $10,000-$12,000 on BTC ($7.50 area on BITO).

$TSLA giving us a nice preview of what’s coming in the crypto markets 🍿

— Mark Croock (@thehonestcroock) December 27, 2022

Final Thoughts

In a brutal bear market (like this one), price action becomes less predictable. And this is especially true during the last week of the year.

So, when potentially actionable setups (like the charts above) show up, I’m on high alert. 

Take a look at these charts on your own time and see if they might fit into your game plan.

I know I’ll be watching these setups closely over the last few days of 2022 and into the beginning of 2023.