This is where you rely on the fact that the market is in a downtrend, but has just put in 3 up days in a row, with volume decreasing each day. We’ve got 50 day and 200 day moving average resistance just overhead. Simply put, the money trade is on the short side, at least in the near term.
With that in mind, here are 10 excellent short setups. I guarantee you these are the best you’ll find on the internets.
All of the symbols are linked. Click on them for the chart…
Just tried shorting VECO, but got declined.. This Canadian broker sucks, don’t have any shares to lend me… Just called me too, to just tell me that – no coverage… 8-(
Wood, thanks for the post man. I picked up some VECO this morning. Any idea on how long you would hold or how much up side this has? I have been following you for a long time just rarely post… thanks.
jobo, I have backtested this with a range of stops…I would use a stop somewhere between 6-12%. These trades typically last only a few days. Unfortunately I can’t update my exit algorithm in real-time. I have to update at End-of-Day. I’ll be sure to track VECO particularly and will respond here when the exit signal is given.
Thanks Wood. I would appreciate that. I have been thinking of picking up the power dip system since it seems like it is a no brainer and everyone digs it. Were these shorts on the list that are a part of your email or are these just ones you picked from scans within the PPT? Trying to decide between your system and the PPT but I should probably go with both, right?
Jobo, these short setups are not part of the Power Dip. They are something that I started working on a long time ago, but then put it away when the market bottomed in March 09. At that point in time, shorting was pretty much sure death to the account. I’ve been dusting it off and tweaking it since the markets have gotten volatile and broken down beneath their moving averages. The PPT won’t scan for these particular setups, but it is an awesome tool for screening both technical and fundamental setups.
The Power Dip can be used in conjunction with the PPT, but the Power Dip is a specific strategy, a swing trading strategy designed to buy weakness and sell strength, with the average trade lasting about 5 days. I built it to be able to be traded by people who work and can’t do much daytrading. Have you tried the free trial?
Wood,
I plan to give the Power Dip a free trial soon. Thanks for the heads up on VECO. It appears that it is on Jake’s lists of longs that he is eyeing. Your advice was to only hold this guy for a few days… is that still the same advice? Does this have more upside? Im still a novice but I assure you that I do not live in my parents basement like the rest of these idiots… haha. Thanks man.
Wood,
I noticed that one of the picks for the opening Friday the 9th, has been presented again as a new pick for Monday the 12th. Does this mean that I buy it again on Monday’s open, so that I end up with two positions of it on Monday.
Thanks!
Hawaii, you could, but then you’d have a significant amount of you account at risk. I’m using 2% risk on that trade, so if I take another position, I’m now at 4%. Lets say I’m trading 100K account, so now I’m risking 4K on the trade, if my stop hits.
Some calcs-
1 ATR for that stock is 2.89. So I take 3*2.89=8.67.
Divide my risk by the 3ATR = $2,000/8.67 = 230 shares.
Stock closed at 91.07.
So I buy 91.07 * 230 shares = $21,008 with my stop set 8.67 beneath my entry (assuming 2% risk with 3ATR stop)
Now, since I’ve taken roughly the same sized position twice, about 40K of my 100K account is in one stock. I do not advocate having 40% of capital in one stock. I think that is too much risk and is asking for serious trouble.
So the short answer is no, I would not take the trade again.
Thanks Wood,
That’s sort of what I thought, but glad to have you clarify. At this point, as I get comfortable with your system, I using half of my port and position sizing at 1% risk 3x ATR.
Also, just to let you know, I’m beginning to appreciate this sizing approach the more I use it.. After reading about it from you as well as others, I had a pretty good conceptual sense of it, but now by actually using it, I think, I’m starting to get a much better sense of it.
Jobo, re: VECO, no sell signal yet, but since this is a mean reversion trade, it will not come until VECO trades down for a day or so. These mean-reversion trades are tough because they typically shake you out right at the inflection point. My advice is to decide your risk limit, set a stop there, and not worry about it too much from there. I have no idea how much farther VECO will run, but if you are anything like me, you’ll cover it pennies from the top 😉 And that is why I just decide my risk, set my stop, and try not to worry too much.
The market is on a strong snapback rally run, but it won’t last forever. With today’s gains on the back of 5 higher closes, the market is close to putting in some record-setting statistics. The question is whether the market will turn before your stop gets hit.
Wood, thanks for the response. Good advice… as always. Keep up the good work man.
Jobo, you’re gonna want to close that VECO trade today. While I do not have my exit signal in real time, only end-of-day, I’m fairly certain it will be giving a buy-to-cover signal.
Congrats on waiting out this trade and not buying at the top!
Wood,
I closed Dug out because it meet the adjusted exit threshold. However, I noticed you still have it as an open position. How come?
Just to let you know, the trial version went well.
5 out of 6 wins with an average return of 1.61% per position. And I’ve already profited enough to pay for the subscription several times over. So I’ll be signing up tomorrow.
Thanks much!
Hawaii, that is freaking awesome, your performance!
DUG reversed at about 3:40 and closed below the exit threshold; therefore it wasn’t closed. I was able to watch it trade yesterday in real time, and I almost closed it early, when it was trading above the threshold. If you keep closing these early, just waiting for them to exceed the threshold but not waiting for the close, keep records of what you are doing and your thinking behind it. Many folks have asked me about closing them early. I have no way of backtesting that and I can’t often trade during the day so I have no way to try it in real time.
Thanks Hawaii- see in you in the forum, or you can always email me.