All Entries Tagged With: "Short Selling"
Week 3 Trades Review (Video)
January 20, 2012 at 9:52 pm
The market gapped higher for its third consecutive Tuesday of 2012, which again helped to make the difference on the week for the indexes. The remainder of the time was marked by a considerable amount of choppy, trendless action, serving as another reminder of the importance of trade selection in this low-volatility environment.
For the week, I took a number of entries as both day trades and swing trades, and it was a really nice week. Both timeframes provided profits, which is a big advantage of having capital at work across multiple timeframes.
As I did last week, I wanted to give you a show-and-tell look at the trades I took this week. It should give you a feel for not only how I managed my trades, but also the kinds of setups which have been working well of late. And for those curious about our trading style in the member area, this should give you a good indication of what a typical week looks like. (Note: I do have 2 open swing positions which are not outlined in the video since I’m still discussing my management of them with members).
Be sure to watch for the weekend index review video as well.
(Direct video link is here for those interested in embedding it elsewhere to share).
Be sure to view in HD (720P) and full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Get our free newsletter to keep up!
Follow @TheStockBandit
Week 2 Trades Review (Video)
January 13, 2012 at 4:38 pm
The first 5-session trading week of 2012 saw a little bit of everything. We saw another big Tuesday gap to the upside, a fair amount of profit-taking on Friday, and a lot of lateral movement in between. Overall, the indexes finished modestly higher, but the net changes on the surface sure didn’t tell the whole story.
Personally, I took a number of entries as both day trades and swing trades, and it was a really nice week. Both timeframes provided profits, but the day trades did most of the heavy lifting with it being a week where the overall market saw only limited follow through. Then again, that’s exactly why I trade multiple timeframes and share those plays with the membership at TheStockBandit.com.
As I did last week, I wanted to give you a show-and-tell look at the trades I took this week. It should give you a feel for not only how I managed my trades, but also the kinds of setups which have been working well of late. And for those curious about our trading style in the member area, this should give you a good indication of what a typical week looks like. (Note: I do have 2 open swing positions which are not outlined in the video since I’m still discussing my management of them with members).
Be sure to check out the weekend index review video as well.
(Direct video link is here for those interested in embedding it elsewhere to share).
Be sure to view in HD (720P) and full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Portrait of a Short Squeeze
January 9, 2012 at 10:47 am
WTW was in a clear downtrend. The stock had failed in early-November to clear late-October resistance, and subsequently reversed lower. Each bounce was sold since then, with a series of lower highs and lower lows.
Last week, the stock broke to a new correction low by undercutting the December lows on heavy volume. What followed, however, was obviously both shocking and painful for the shorts.
Wednesday’s arrival delivered upbeat news for Weight Watchers as U.S. News & World Report put it at the top of the list for best weight loss diets in 2012. Consequently, Wednesday’s bar was a bullish engulfing bar as Tuesday’s low was undercut before a close above Tuesday’s high on even heavier volume with a 7% pop. Then we saw near-record volume Thursday on an 8% advance, and further upside continuation Friday with nearly a 9% gain.
Change of character? Absolutely. Value-buyer accumulation? Hardly. This is the portrait of a short squeeze, and it’s one reason shorts require absolute stop losses. The sudden shift can rip the faces off of shorts who panic and rush for the exits while opportunistic bulls get long. The combination can be explosive, as seen here in WTW.
The lesson? Watch your shorts and don’t give them more leeway than they deserve. Keep stops in place and be mindful of what’s possible when the tide shifts. This is one kind of move you don’t ever want to experience from the wrong side of the trade!
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Week 1 Trades Review (Video)
January 6, 2012 at 5:30 pm
The first week of trading for 2012 is now behind us, and overall it wasn’t very exciting. A big gap up on Tuesday kicked off a positive week, but after that we saw the market essentially make no progress as it spent the remainder of the week moving laterally with mixed and minor net changes.
Personally, I took a number of trades and saw mixed results as well. Some trades worked great, others failed quickly, and some didn’t go hardly anywhere. Nonetheless, it was a good week of trading because of how my trades were managed.
As a trader, I need to be able to diversify by way of different timeframes and direction (long/short) in order to keep maneuvering efficiently. So to help explain this concept and the value of doing it, here’s a video walking through the trades I took last week. (Note: I do have 2 open swing positions which are not outlined in the video since I’m still discussing my management of them with members).
(Direct video link is here for those interested in embedding it elsewhere to share).
Be sure to view in HD (720P) and full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Post-Earnings Day Trading Profits
October 20, 2011 at 6:43 pm
Earnings season brings with it a host of opportunities. It includes the potential for new leadership to emerge once it’s all said and done, but in the heat of it, the price action offers some excellent chances to participate in emotional short-term moves via day trades.
Traders expect big gaps during earnings season, and quite a few roll the dice ahead of it in hopes of receiving a market gift. Fortunately though, a trader need not participate in the gap itself to do well.
The post-earnings gap is a regular occurrence for most stocks, although some make a larger move than others. The outlier moves are the ones to watch closest, as they can signal either the beginning of a new move, or an overreaction with reversal potential.
Thursday’s move in PLCM was an example of the latter, as a 30% opening gap to the downside proved to be a bit much. The stock made a huge run higher intraday, although as I’ll show in the video, catching the entire run wasn’t necessary. Instead, grabbing pieces here and there can prove quite lucrative when there’s heavy volume and high emotion present.
In this video, I’ll share with you how I profited in the stock despite feeling like I missed both the big moves (the gap and most of the upside reversal). The fact is, when a stock is in play like PLCM was, there’s opportunity for several kinds of plays along the way. And the exciting part is that this happens nearly every day during earnings season, 4 times per year.
Be sure to watch full-screen on the 720p setting for the HD version of the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Timeline of a Short Squeeze
June 3, 2011 at 11:17 am
Active traders couldn’t help but notice the moves in VHC over the past couple of months.
Coming from relative obscurity in the 12’s, the stock caught fire from late-March into early-April, running to nearly $30 in just a few weeks. It then settled into a wide congestion zone as it did a good job of digesting that massive run.
We ended up with a very broad symmetrical triangle pattern, which also resembled a huge bull pennant when the preceding rally was included. Here’s a look at the run it made, along with the pattern I’m referring to:
Now, symmetrical triangles can break in either direction, but when found within the context of a trend, it never hurts to watch for an upside resolution. After all, these triangles are simply areas of indecision, and given the prevailing trend was up in this case, many were looking for that trend to continue once the period of indecision was resolved.
In mid-May, however, the stock began to falter as it undercut the lower trend line of the triangle. It appeared as though some further profit-taking was about to kick in, so the tide shifted. A hard breakdown was quickly embraced by short sellers aiming to profit from a move to lower levels. Volume picked up with the distribution, and multi-week lows were made. Here’s a look:
But as the stock began to bounce, the selling never resumed. Bulls sensed a failed pattern in the making, and they pressed the long side for another run. Bears, meanwhile, recognized they were trapped, and quickly began to cover their shorts. The resulting melt-up was quite impressive, as the stock tacked on more than 48% over the course of just 7 trading sessions. Here’s a look at that run:
As you can see, the day it peaked (June 2), it also reversed lower. Thanks to an exhaustion gap in an already very extended stock, we saw a last-gasp attempt at a push higher before the inevitable pullback kicked in, brought about by profit-taking.
Since then, the stock has corrected a bit further, and may have more room to rally in the days and weeks ahead – who knows. Rather than guess at what happens next out of this non-pattern, let’s consider some useful lessons from this short squeeze of the past couple of weeks and see what we can learn.
3 Takeaways:
- Obvious patterns don’t always play out as expected. The massive symmetrical triangle / bull flag setup had a ton of eyes on it, and had it broken out initially to the upside, it may have produced another ramp higher. Instead, it broke down first, catching many off guard – ultimately in both directions. Wait for your signal, and never underestimate the importance of keeping an open mind, and be ready to react to whatever comes along.
- When you determine you’re wrong, get out. That might sound elementary, but simply doing that could have avoided a lot of pain for those adding to their shorts as VHC reversed higher or simply not covering until the pain was too great. There is room in this game only for those who exhibit discipline, all others will fund the ventures of those with that trait.
- Always consider the other side of your trades. This is important on the front end, before you enter, but it’s equally important during your trade. Those caught leaning short in VHC needed to consider the opportunity the bulls were facing once the breakdown level was reclaimed ($23 broken on 5/16 and reclaimed on 5/26). Don’t take your eye off the ball, even after you’ve made contact with it. The home-run you think you’ve just hit might only be a single, and that’s alright. Weigh the alternative, and if you find yourself on the wrong side of the balance, call it a trade.
The next time you’re caught in a short squeeze or you see one developing, keep in mind how far they can go – it will either give you an opportunity to exit your short sale with less pain, or hop on board for a quick momentum ride.
What experiences or thoughts would you add to this?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Trade Review: BIDU Breakdown
May 18, 2011 at 11:56 am
One setup I recently had success with was found in BIDU. Although the money’s been made on this trade, there are still some lessons we can take away, so let’s take a closer look at the trade as it evolved and see what we can learn from it.
The entire Chinese internet stock group had been weakening of late, with names like SOHU, SINA, NTES, and others beginning to struggle. This followed months of leadership, as these stocks made big upside runs by building bases upon bases. The momentum shifted a few weeks ago, and in every case these stocks topped prior to the market’s pullback. (That’s why they call them leaders).
BIDU did the same thing, having peaked in late-April ahead of the major averages like the NASDAQ. Once the overall market began to pull in, these stocks accelerated to the downside, providing further evidence of an important change of character. Having become oversold, they rebounded, but in a lazy fashion. This set up quite a few bearish patterns, with the rising wedge being found in BIDU. I highlighted this pattern for premium readers on the main site, looking to short BIDU upon a break of the lower trend line at $139.50.
BIDU broke that rising trend line, a day after its counterparts NTES & SINA. That offered not only a clean entry for a short sale, but also a stock which had potential to play catch-up on the downside.
I set a pair of targets for booking profits at $132 (yellow line in chart below) and $127.50 (red line on chart below), respectively. Target 1 was reached on day 3 of the breakdown, which was just slightly ahead of the 2/14 high in case it were to be tested. Target 2 was reached on day 4, and that level corresponded with the lower end of the same mid-February congestion zone.
While this stock eventually overshot my $12 per share profit target, it became oversold. Anytime a stock moves too far, too fast, it’s time to watch for a snapback. BIDU has done that in the past 2 sessions, but remains technically damaged. Here’s a current look:
This stock and the others in the group are currently bouncing from their lows, but they remain in a bearish series of lower relative highs on their daily charts. That is to say this bounce may get sold into again, so although this short sale is long since over, we have no evidence yet to support a lasting trend change. Until we do, these are stocks to watch for new short-sided entries to emerge.
A few takeaways:
First, clean patterns are the place to focus. They make it simpler for me to recognize when to be IN a trade, and perhaps most importantly, when to be OUT of the trade. Tighter, more well-defined patterns help me be decisive, and in this game, that’s huge.
Second, stay on top of the sectors. While it’s a bit harder these days to play follow-the-leader when it comes to sector moves, it can still be done with success. Take note of which groups are shaping up for advances or declines, and work the charts for favorable candidates.
Third, when you get your move, ring the register. Greed could have kept me in this trade for a little bigger move, but it also could have kept me in too long, leaving me now to wonder what to do on the current bounce. Blend the info you get by looking left on the chart along with the pattern projection to come up with an exit strategy. Then stick to it!
Fourth, (and this goes hand-in-hand with the previous note), sharper moves are more prone to reversal. When your targets are in sight (or already hit) and the move is getting a bit stretched, expect the rubber band to snap back at least part way. Tighten your stops, book gains, and generally start expecting an imminent exit. Pigs truly do get slaughtered.
Here’s to your next trade, whether a winner or loser, and your commitment to take from it what you can – whether it be profits, a lesson, or both.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
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