We’ve opened a new bearish trade on Etsy (ETSY). ETSY picked a tough time in the market to have its initial public offering (IPO).

Sure, after Etsy listed the stock’s IPO price at $16, the stock jumped as high as $35.74, but it has been a steady decline since then. Following the company’s first earnings announcement on May 19, the stock dropped to $17.20 and continued to drift lower, finally reaching a low of $12.80 on July 6. Since that time, the stock has been rebounding — enjoying a massive surge on July 17 after being mentioned during Google’s (GOOGL) earnings conference call — but we expect this rebound to be short-lived as we head into ETSY’s next earnings announcement on Aug. 4, after the market closes.

ETSY is facing a number of headwinds. First, its gross merchandise sales (GMS) growth is slowing. GMS grew by 43% in 2014, but according to ETSY’s last earnings announcement, growth has slowed to 28.2%. This is not good for a stock looking to command a high earnings multiple. Part of the slowdown was due to a rising U.S. dollar, and unfortunately for ETSY, the value of the USD is still high.

Second, the company is spending more — especially in marketing — to generate smaller incremental gains. Third, Amazon (AMZN) announced it is launching an ETSY competitor: Handmade. Anytime AMZN steps into a new market, the current participants in that market take a hit. Watch for AMZN to steal market share from ETSY. Fourth, much of the recovery in ETSY’s stock price seems to be short-squeeze driven. If the company reports lackluster earnings, the short squeeze should subside.

We anticipate ETSY is going to drop back down toward support at $15 — the level the stock hit in early-June. Of course, it could drop down low enough to challenge its recent lows, but we are being a little more conservative in our expectations.

‘Buy to open’ the ETSY September 15 Puts (ETSY150918P00015000) for a maximum price of $1.45.

We continue to the hold the Adobe (ADBE) calls we recommended

, but we suggest taking profits in the Crocs (CROX) puts trade we opened last week. Our SlingShot Trader members get our real-time recommendations and text alerts telling them when to take action, and we were able to capture 97% profits on the CROX puts.

InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.

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