Knowing when to short and knowing when to long may seem simple but in reality is the only essence of trading. Therefore today I will write down a list of what I look for shorting.
The best short setup plan pm:
-individuate news that you have tracked’. Each morning when I say, I’m trading news around 5.30-6m Ny time, it means this. Reading all news, pr, coming out and identify which stocks are going to move, which ones are not going to. I’m looking for:
- A) big catalyst that can have follow through(merger, phase 3 endpoint met) so I will look to long on dips
- B) sketchy news, bs, recycled (trials, midpoint met, fda fast track designation) so will look to short these
- C) Sec involving notice delisting like 5550b or bad news for the company, generally a gap down, looking each pop to sh
-chart, individuate levels of main supp/res, looking at 200ema 200sma and 5ema for reason explained in room everyday. Take a look at overhead resistance, is there any big volume at that level in the past, will sellers want to jump in at that level and bagholders ‘d like to dump and get out of that position?
-chart is it downtrending or uptrending? Was each spike sold? If so, u already know how toxis is a company, even before looking at prior r/s and/or filings.
-the stock is gapping > 30% = first reason to get interested in it. I start then looking at volume pm, levels explained above and I see a top is forming at the prior daily resistance.
Pm volume is relative low comparing to the float, about 1/10, not much interested from the traders, therefore I’m looking to short this heavily today and it’s not a micro float(below 3m), therefore I have less chance it will be squeezed.
-meanwhile I’m looking at filings, I learn from them: huge debt, neg NWC, still some atm from the last 10q on, warrants ahead, low % IO (another reason why noone ‘d like to hold this).
-now I’m ready to start my plan, only starring at tape and chart, giving more emphasys to tape. Is it already flushing in pm, sign of that dilution? Each time it bounce, do you see a fast wash and dump? On the times&sales do you see a series of big orders jumping in, any soak on ask, hidden sellers?
-pattern formed at open, spike fast with no follow through and over/under the next whole $nr. Now I have a set risk, risk away after that whole $ number a set of sellers put themselves on ask and I see sellers/shorters jumping on the bid and creating selling FOMO. Buyers are trying another attempt to push hit(2nd lower high) but each bid that hits, has 2x seller ratio. Volume imbalance, red prints, adding to position, set risk now.
Right now, did you do your pm plan? Did u already looked at possible scenarios that could occur at open? Do you have were this will stop, your take profits have to be before any bounce…. So again (fast look to your daily/prior days supports), pivot points, 2emas 1mins chart, 200ema 1mins chart and 200ema 5mins chart. Now you have reason why to hold this.
As I say:
“HOLD UR BALLS “