Paper chasing

Yesterday was an awesome day to enter shorts!  Did you pay attention to the market, or were you a “paper chaser”?

1)  Vix between 35-40 = start looking for shorts.  (See 1/2/09 “Careful with this week’s tape” and 1/6/09 “Looking to buy EEV down here” to see how complacency in a bear market is not good)

2)  Laggards leading market, leaders taking a break – this is what I call “Paper chasing”, and it increases the probability for better short entry point. (See post 1/6/09 post “Leaders pulling back, time to attack” to see how to use leadership as a gauge for the market)

How effective have these 2 flags been!

Yesterday I flipped my positions and went 100% short when the market was up +140.   I even tweeted to the bears to just hang in there.  3 of my shorts from yesterday are down over 8% today.  Not bad, eh?  It would have been 4 stocks if I didn’t get stopped out of DRYS yesterday near the close (stop was set to 15.15.  Idiot.)

HOWEVER, look at the leaders today, they haven’t really continued selling off.  If they were, I would add to these shorts.  And volume was actually better yesterday on the Nasdaq’s rally.  So, respecting that action I will cover at least two of my shorts, APEI because STRA is green today, and EGO because it’s near my buy point (under 7).  I will also cover EDU which looks a little panicky.

Laters players!

-gio

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