Here's a nice looking SHORT, divergence on RSI, increased volume on higher prices after an excelerated run up.
I have set a first target of $8.00 on this trade because there was increased volume around that price before it
exploded upwards on news of strong earnings. Therefore I am happy to take profits around $8.00, which is 10%
Should price break below $8.00 I will re-enter the trade again with a possible target at an old resistance level of $7.30.
I short sold the stock on 31st Jan @ $8.81.
DISCLAIMER: These are my thoughts only and NOT advice as I am NOT a licensed advisor.
Please consult your stock broker for advice.
Update 12th Feb: Price was pushed up today on very light volume, which can happen by institutions wanting the price
to be higher so they can sell more shares. I am not taking profit just yet as I still believe it could come down to my target
of $8.00 however I am not prepared to give all my profits back so I will lower my stop to $8.70.
Update 14th Feb: Today was a very low range day, price only moved between $8.40 and $8.48 and the fact that there was very light volume usually means that there is no interest in the stock.
People holding the stock may realise that there is no interest in it and may decide to sell, thus push the price towards my profit level. I have lowered my stop to $8.55 because it seems to have formed a bit of a resistance level there and a break of that level would give buyers confidence resulting in them pushing the price higher, which of course is not what we want :o)
Update 26th Feb: As you can see this trade is becoming frustrating, price is channeling along the resistance level of $8.60 which is still in profit but not moving anywhere. There is however nice volume coming into it suggesting selling, We expect this one to start moving down soon.
Update March 12th: Well this is one of the frustrating things that can happen in the market, its what is known as a "bull trap".
Basically the stock was channeling sideways for some time, then it broke up, bulls (buyers) panic and buy the break as they think it is going to accelerate upwards, as I had previously mentioned we would exit the trade should they break above $8.60 as buyers would become confident and drive the price higher. As you can see by the chart they did infact drive higher and we exited at a small profit (2% or 10% including the leverage) on the 4th March. After the day in question, the sellers came back into the market and drove it back down, so it seems we have been caught out by a bear trap. The important thing here is that we stuck to our trading plan and after all, at the time when we exited the trade we did'nt know how high the stock would go, we sure did'nt want to turn our profit into a loss which can happen if you bend the rules. ALWAYS stick to the rules, we could have re entered the trade but unfortunately we had too many other trades going so we missed out on re entering. Besides, sometimes its best to just go and lick your wounds, getting revenge can bring you undone !! There are plenty of other trades in the market, so we will just write this one down as unfortunate :o)
