I’ve been going through some charts and it looks like we will be getting some rare day-trading opportunities this month. I suggest taking partial profits in winners, while cutting losers that haven’t moved in your direction right away (ie, 3 days and you’re still in the red). I will be allocating resources (time, money, studies) to day tradable sectors. Right now there is a lot of uncertainty in the market. The past few weeks have been a correction on a longer correction. These subset trends can really catch people off guard and I highly recommend that new traders keep positions relatively small. The patterns are against buy-and-hold whether long or short. You have to blend flexibility with patience, which is very hard to do.
Currently my day-tradable sectors include: gold, semis, oil. I want to include healthcare/medical, but that is a little tricky.
Swing sectors remain: Education, Coffee, Retail
Of course, within these sectors we are looking for “high-surf” stocks for day-tradables, while we are looking for under-the-radar trends in the swing sector plays.
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What would you suggest for new traders that don’t have enough capital to meet the requirements to day trade? I’ve only been following the market for a couple months and I’ve been putting on trades that have been set up well and they will go my way for the first day or so but then the market tends to go against me. I’ve been trying to factor in what the markets will be doing before I make trades but I’m not super good at it so far. It is tough because I want to trade but I don’t want to put on trades just for the sake of trading.. I want to do what is profitable. Oh and I was wondering what do you use to find stocks in certain sectors? Like you said Education Coffee and Retail are good for swing trading.. is there a site or something that will help you break down what stocks go in what sector? Any advice would be appreciated.. thanks!
your strategy will be quite different from a traditional “trader.” I think an average-in step-up method would work for you. The idea is that you will enter a position over time, and not focus too much on a trade not working right away (versus a short-term swing trader that takes advantage of the faster moves and volatility). This will work better for you because 1) it takes the emotion out and 2) it will give you time to understand the stock and correlate it with the company.
I use IBD to find good stocks. I use the IBD 100 list to search for trends. And I use the PPT engine to monitor these stocks. I also have this pretty good screen that I made on the PPT which searches for high quality companies. That’s just me… i like to go long bullish sectors, and short overbought sectors, and day-trade volatile tapes.
Hi Gio, I’ve been following your writing for a long time, but I don’t think I’ve posted. I’m in a fairly intense learning phase and starting to look into the dynamics of shorting. I think you’ve got a flair for it, and much of your style / philosophy works for me. I’d appreciate your opinion coming at it a little differently.
Specifically, I’m looking into short squeezes, I had a great experience with TLB a month or so back. My current focus for the immediate future are two stocks; ALGT and OZRK. Both have very high short interest, and ratios, as well as charts that look to be very positive. There are other short / intermediate term dynamics at play, oil headed down favors ALGT, and financials reporting this week (I think they’ll be far better than expected – BS or not)
I’m thinking ALGT around $41 and OZRK around 22.75, breaking their 200 days on strength and volume might trigger some pain and be a good long oportunity.
Thanks in advance!
OZRK – in at 22.80 – met my criteria, we’ll see…
Great play! This is indeed a short squeeze candidate. I think this has more to do with earnings though… if they impress this should squeeze about 26.
I have different timings for short-squeeze stocks versus stocks I out-right short. In general, they are both very short compared to longs.
ALGT in earlier at 40.92 (posted on CA)
… another solid long bet. ALGT has good revenues, and you’re right, has been tied to oil. I’m not too familiar with this company but anything with a high short interest ratio >25% while still having uptrending moving averages is a great spot to look for in a short squeeze. one thing about ALGT that favors a squeeze is that its correction stage occurred during the swine-flu travel scare.
There are two types of short-squeeze candidates you want to memorize:
1) Momentum stocks
– these are very bullish stocks that people short when it pulls back a little. These are the wrong stocks to short, and usually leads to new highs via squeeze. You can view GMCR, APOL, and PALM charts for example.
2) Very oversold stocks
– these lead to what CA calls “spikers.” These have the biggest moves in the shortest amounts of time. The LONG-TERM shorts cover and that really sends these stocks up fast (then they slowly die). You can view DRYS, YGE, JASO, CROX as recent examples.
Thanks for the insight Gio. I read your stuff everyday, though I’ve never shorted (except through an iETF). I’m trying to round out my skill set as much as I can. Seems pretty clear understanding core principals and perspectives on both sides of the equation is a must (at least for me).
Both picks performed well today in a hot market and I’m holding. I know you (as well as RC and CA) have a winning hand on both sides of the fight, which is where I want to be down the road.
yup… neither bull nor bear. our discipline is to know what the current rules of the market is and to trade accordingly. never fall in love with a stock. focus on the process.