What do shorting momo stocks and mating hedgehogs have in common? The answer is simple (as provided in the old corny joke) – both have to be done very carefully for in both cases there is a serious risk of enduring tremendous pain in the ol’ kibble and bits.

I’ve had my eyes on COCO for a couple of days now as it’s morphed into a monster squeeze candidate. MACD crossover, swift recovery from a big down day, RSI in the oversold territory- all markings of a potential bottom (as with all the indicators and signals confirmation is required). My thought was that if it started to squeeze, it could run as high as 200SMA.

Well, as it often happens (or maybe it just often happens to me?), due to circumstances beyond my control I was away when COCO-the-monkey broke out this morning and started squeezing shorts with tenacity and ruthlessness reminiscent of the famous Nicky Santoro in ‘Casino’. The shorts were told  ’ I got your head in a fuckin’ vise. I’ll squash your head like a fuckin’ grapefruit’ and once a few eyeballs were lost, they cried uncle and COCO rippage ensued. Needless to say I was none too happy about missing the opportunity (COCO was up close to 10% when I finally got to the trading station), and was tempted to take my revenge on COCO by shorting it.

Thankfully, the cooler voices in my head prevailed this time. Not sure if it was due to anticipation of upcoming 3-day weekend and all the debauchery and shenanigans associated with that, but regardless of the reason, I decided that if I do take my revenge on missing this rippage, I have to wait for the right time to do so. And yes, I realize that seeking revenge on a stock and a missed opportunity sounds about as rational as Charlie Sheen’s ‘Winning’ interview on ABC, but hey as he said during that interview –  ’we are entitled to interpret things as we must’.

And as I waited, lo and behold, things started falling into place. Check out notes on the attached 2m chart, but these are the main points that I considered for shorting and entry selection (as they unfolded, in chronological order):

• Bearish MACD divergence
• Violent rejection of short-term resistance (large price candle and a huge volume dump)
• And finally bearish crossover of 20 and 9 EMAs – good entry point. 

click to enlarge

I did cover 1/2 a little too soon at 2.88 from 2.98 entry (there was really no reason to rush into covering as it was dropping like a rock), but I’m still working on this whole shorting game, trying to do it like hedgehogs mate… very carefully. Final cover – 2.81 from 2.98.

Comments and feedback are much appreciated – as always.