I am a day trader, I love the thrill of the trade, every day presents a new opportunity. I don’t believe that there is any better teacher than experience, so much of what I know is learned from my trading successes and failures. I stick with what works for me and that is shorting.
For me it is easier to spot a stock that has moved up too fast, rather than buy a stock hoping it will keep going up in our uncertain economic times. I watch CNBC all day, every day. I read information on the internet on trading strategies and technical analysis. There is always over exuberance in the markets you just need to find it.
Every morning I tune into CNBC. I check the futures and read about what is going on in Europe and how their markets are trading. I watch pre-market trades, to see if any stocks have had a major move up on pre-market news. If nothing peaks my interest, I wait until the market opens and start checking the biggest percentage gainers list.
If I find a stock that is up 20% or higher (the higher the better), that interests me. I will look up the symbol read whatever news was released, then I make a judgment on whether I think the move is too much.
The best time to make money in the markets is the first and the last half an hour.
- If I decide that a stock has moved too far, I’ll start checking other things like the chart, how has it been trending.
- A stock that has been in a downtrend is one that I would rather short than one that has been going up and spiked on some news.
- Volume is something I factor in, on a pop in share price you want to see a increase in volume.
- I check the float, the larger the float the more it interests me.
- Low float stocks are a dangerous short, you never know how high they might go.
- I’ve seen low float stocks go up over 600% in a day. I’m not saying I don’t short low float stocks but I’m more cautious.
- I’ll take a small short position on a low float stock when it seems the price action is slowing and the volume is decreasing.
- I keep watching the price and volume.
- If the price keeps going up I’ll increase my short position.
- Depending on how high it has moved depends on whether I hold my position over night.
- One more thing to check is the percentage of the float that is short, you do not want to short a stock and get caught in a short squeeze.
On January 17th 2012, around 10:30 I noticed KUTV up more than 170%. The company is a Chinese internet television company that announced an agreement with YouTube. The price moved from $1.35 on the 16th to over $4.00 on the 17th, the volume was huge compared to the 183,600 shares that usually trade.
The stock has been in a down trend for the previous 9 months, it does not have a large float 10.62 million but it’s not tiny. The short position was minimal. I shorted at $3.58 a share and I’m still short. As of right now I have a 39.72% return on my KUTV postion.
Friday I noticed SCHS up just over 50% there was no news other than the previous day they announced their 2012 expanded offering of classroom technology solutions.
It had been in a downtrend for 6 months, volume was 4 times normal, float 16.3 million. I shorted at $3.12 and covered at the end of the day at $2.93, which gave me a 5.98% return.
Like I said there is always over exuberance in the markets you just need to be able to recognize it.
As always, no matter how you trade long or short may all of your trades be profitable!