Short Selling Stocks: Plays Galore Limited By Absurd Pattern Day Trading Rule aka SEC Reign Of Terror

As I posted early this morning, there were lots of potential shorts today, but I had to be extra-choosy due to the SEC’s reign of terror over accounts under $25k (explanation down below).

sec

Awoke early and reserves shares of my favs—placing my sell limit orders waaay high, intent on lowering them if and when any became good plays:

-300 ASTI @16.99 LMT
-300 GU @16.99 LMT
-1000 BPAX @5.99 LMT
-1000 REED @4.99 LMT
-1000 QBIK @3.99 LMT

Didn’t even need to reserve any COT, it was listed as easy to borrow. But my top pick was REED, and I was hoping—somewhat naively—to get a morning spike to short into…no such luck. It went down quickly, bounced, down again, blah whatever, volume for the day was 60k, spread between bid and ask was 20-40 cents, no thanks. Next!

BPAX—no morning spike there either—disappointing. Had the chance to short my 1,000 shares into a quickly disappearing block at $4.39, but I hate shorting morning droppers, too high risk of reversal, so I hesitated and it passed me by, on its way to $4.10-ish. Missed out on $200 profit, but if it’d held $4.39, it could’ve easily spiked, risk of $200-$400 loss, not a good risk-reward. As evidenced by its surprising afternoon comeback all the way to unchanged—this is not a typical hype play. Next!

Noticed my ASTI order to short 300 ASTI had surprisngly executed at $16.99, the stock was up $1.70 on the day, daaaamn, not a high enough limit order, my mistake, actually a pretty good entry price. 10 minutes later, the stock proved unworthy of holding such daily gains and I covered at $16.69, poor exit, but a nice mistaken $80 profit. Nowhere near close to being a pattern I’d ever play, had an afternoon fade, but also a late spike—shorts couldn’t take it negative, nice higher highs on this one, too risky to short. Next!

Some ANALyst ruined GU’s spike, downgrading it due to its runup. Coulda woulda shoulda shorted into the morning drop, but again, not my ideal pattern, only missed out on $200 profits. Sad—these ANALysts are right about 30% of the time, why are they even allowed to publish? They should be relegated to posting on the Yahoo! message boards, that’s it. Piper ANALyst Charles J. Fishman, I’m talking to you. Next!

ERHE is still too low to short and thanks to Friday’s drop QBIK didn’t have much downside. WH just keeps going, like it’s a real company or something…HYBR shows nice strength, but I’m getting reports from dozens of sources about their spamming, not since SOIGF have I heard of a company being pumped so hard…tough to go long into such fraud.

After ridiculing some guy who got excited about COT breaking $3.75—$3.70 turned out to be the key level after which it really cracked, down to $3.30, maybe that guy should ridicule me!—I watched it all afternoon and when it cracked perfect sideways price action at $3.50, I excitedly/stupidly shorted 1,000 shares at $3.48…gotta learn to be more patient as it held right around there into the close…a bearish chart to be sure, but still green on the day, signal potential morning spike, even if I am rather confident in this short down to $3.25-$3.30, then the question is can it crack 2-day support there and reward me down to $3…easy to borrow shares, small enough current position and overwhelmingly bearish long-term chart means I might add to my position on any strength…

VSE, USBE and YTBLA also all had morning drops, meaning I’d only look to short into their weak closes—not that I could even short YTBLA since I found no shares. Out of these three, YTBLA was the only one to rebound—probly as a result of its hard-to-borrow shares (meaning shorts couldn’t pressure it). VSE and USBE both closed near their lows—if I wasn’t limited in my trading by the absurd pattern day trader rule, I’d probly have shorted them both into the market close. Both right under 5-day support, clear paths paved for 50 cent + drops, kills me I’m not involved!

So let me just say, damn you SEC bastards, I truly hope you rot in hell. Worthy trading opportunities are already difficult enough to come by without your anti-American restrictions. Maybe you should worry more about the “professional traders” who routinely exercise 50-100x leverage and whose actions could easily bring about the destruction of our economy.

But no, you gotta restrict the little guys. If you’re really that concerned with small investors burning through their accounts, you could help promote my blog…it’d reduce the number of naïve trader-wannabes who think they can trade profitably every day and I promise not to post any more mean pictures like that one…well maybe less of those kind.

Posted in Analogies, ANALysts, Pattern Day Trader Rule, Potential Plays, Rants, Short Selling

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  • Mike

    TIM has an annualized Sharpe of 3 in its 5 months of trading.

  • X

    Tim, I was asking about your input on REED because I was contemplating shorting it but I was tied up with other positions that tied up my capital.

  • Brendan Long

    How much money did you lose today Mr. Sykes?

  • Mike

    Brendan, he made money today I think.

  • timsykes

    up about $40 on the day, not worthy of a timometer

  • Brendan Long

    I lost some pocket change….
    Way oversold on the Walmart news – I wouldn’t short this – it’s going back home
    Your site is fun to read – I laughed at the cake with 25 on it- but I’m long on COT and for good reason.
    Look at the charts guys

  • Tony Ellis

    How are we going to play LUNA?

  • Neil

    anyone have thoughts on LEH?

  • Mike

    Neil, here’s a good commentary on Lehman, http://muffmarkets.com/hbs05/2008/03/19/entering-with-erin

  • Neil

    down since that article. News out tonight. I read it as serious dilution but curious about what other people think.

  • http://smallcapslingshot.blogspot.com/ SmallCapSlingshot

    Regarding COT. I think near term it could pull back some before marching on to $5.45, so Tim and Brendan are correct. Just playing on different teams….

  • http://www.investorslive.com InvestorsLive.com

    Great Blogging Tim, keep up the good work. I enjoy the chart scans, usually I just take them and put them on my 1 minute charts waiting for a breakout or breakdown to short on. I tend to play higher volume stocks for fear of getting stuck in the lower volume ones, however our strategies to cross because I played quite a few of the ones you’re watching … People will learn and learn what to look for in a chart.. for a lot of people this is a very hard concept – but the way you’re show and telling it … it simplifies things

  • Gary

    Timmy…your short might have been to soon! COT

    “Cott Announces New $250 Million Asset-Based Lending Credit Facility”

    http://money.cnn.com/news/newsfeeds/articles/marketwire/0382243.htm

    Think there will be a STRONG morning spick and it will stay there. Let me know if I am reading this wrong.

  • Gary

    The above is a typo…should be SPIKE> Sorry about that.

  • timsykes

    can’t predict overnight news, now i just cut my losses quickly. next!

  • Vince Parker

    Yes Tim, I stand corrected on “whites of their eyes” which I confused with “the shot heard around the world” but it seems a common mistake. I found this in a news article :

    “January 6, 2006

    Thank God our current Senate Democrats weren’t at Lexington and Concord! They would have run the other way instead of waiting to see the “whites of their eyes” as the lobster coats approached.

    If the patriots had held their powder at Lexington and Concord, this nation might still be under a monarchy. (Well, in a way we do still have King George in power, but that’s another story.)”

  • Mike

    Why did REED go from $2 to $4+? Anyone?

  • timsykes

    mike do some research on this site, all my biggest gains come from these kind of crappy stock runups…reasons don’t matter

  • Mike

    Thanks for your reply.

    Reasons matter to you if it’s earnings though, right?

    If reasons don’t matter at all then shouldn’t it just be a systematic strategy of shorting any micro cap stock that exponentially gained and then experiences its first down close?

  • Mike

    I”d rather short REED now if it ran up on say a Dan Gartman newsletter pick then if it ran up on a signed new contract.

  • Dan

    Anyone in tma over night looks like it will be up huge tom. Any thoughts

  • ViciousChicken

    Could have been something as simple as the new VP announcement bringing some visibility to the stock and a bunch of brand-familiar investors buying into a stock they knew nothing about (hey man, have you tried their cherry cola? far out!) Disclosure: I have never tasted a REED product and don’t even know if they make cheery cola, but neither do most people that bought into the hype.

    I’m not a trader (maybe a trader-wannabe, as Tim so eloquently put), but I have to imagine in this business, as opposed to value investing, or investing on base knowledge, you have to find a line between doing the right amount of research, and taking a chance within the window available. I found REED on a chance and did about a half hour of research before I considered moving on it..

    Anyway, enough about this, back to my total ignorance of how to trade- turns out TMA made the announcement tonight that I expected last thursday (they managed to gather up the required $1.35B). It’s around $1.22 right now, and I expect it to shoot up to $2 (or considerably more) before “reason returns”. What is the best way to play this? Do I put a pre-market order in for some shares and set a trailing stop (I can’t watch it all day), or will my pre-market order come in much higher then the current price, and seriously reduce my profit, or even potentially cause a loss? WWTD?

  • ViciousChicken

    Damn I write too slow! I missed two mikes and a dan by the time I hit the post button!!

  • timinhumboldt

    I got turned onto this guy after he sold me on GS at 151. Ive made back all my losses!
    Yes ….20 sessions $69,150.19 profits 74 Wins 7 losses 2 Break even go to http://www.ttthedgefund.blogspot.com

  • Oliver

    Neil, I have an opinion on LEH.

    They want to sue something for $250 mn. The sued company claims that the documents are all fake. I dont really care what the other company is but trying to get $250 mn seems absurd to me. I think a company that has nothing to lose will only do so. So my opinion is that there is a possibility of them experiencing something similar to bear sterns.

    But as Tim always says, this is gambling and could just not happen as well.

  • http://www.easystockalerts.com EasyStockAlerts.com

    would you short COT today?

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  • timinhumboldt

    TTThedgefund is the hottest blog on the web. This guy was born for these weird times. They killed with live timestamped trades…finally real proof from a really smart guy who understands the day to day of this crazy market. Im totally back from disaster the last three months. TTThedgefund will get you the money you need today…live.

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  • AjedrezMan

    How do you reserve hard to borrow shares?

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  • thunderhead51

    MERC in 500@ 3.40, sold at 3.60, $98 proft (after coms). Thanks Tim!

  • BearNine

    +200 on RODM, thanks tim.

  • jspmedia

    wow..great morning spikes on RODM.. Got in really late on Friday but still good profits..got out at $5.40….Up $1040, Great call Tim.

  • preston

    + 57 on MERC, 300 shares. Thanks Tim.

  • bill

    took the gain too early last Friday.

    Out of 2000 EXXI. +$280.

  • jchahboune

    is MERC a potential short?

  • zuluobb

    MERC, wanted to buy 2000 shares at 3.36 and bought 200. Congrats on RODM and MERC. Missed them both. OPXA and OPXAW is flying.

  • jspmedia

    WTF with JAZZ? just several sec, red to up $1+..

  • ev4ztimalerts

    in 4.83 out 5.33 125 profit thanks tim easy 50 cents per share -thanks tim

    thought merc had a better chance of breaking in the afternoon so i held unfortunately and sold later for 75 loss

    total tim profit 50 bucks

  • sbapacific

    Merc: got out too late, lost -$477 no excuse
    Rodm: 4000 shares at 4.88 sold at 5.35 for $1880 profit

  • BearNine

    Profited 600+ on wgat, covered at .9 , didn’t look like it was going to break down more.
    The first time in over a year i’m positive since inception, thanks tim!

    No shares of gfgu =(.

  • csk312

    600+ on RODM

  • mcmike2099

    I know there are going to be a lot of people showing off big gains on Tim’s recent alerts, but I’d appreciate if any big winners would tell me how you execute the trades so quickly.

    For example, on MERC, Tim’s alert arrived at 11:21am on the 4th. If you factor in 30 seconds to a minute to read his alert and enter the order, you would have bought in at around $3.43, as I did.

    Then, his exit alert arrived today at 9:38am. Factor in 30 seconds to a minute again and you get the price of about $3.42.

    Tim said in his latest email that there’s no excuse not to have made big money on that trade, and I’d love to hear anyone’s tips on achieving that. Unfortunately, I lost money, even though both times I was right at my computer with ThinkOrSwim open. In this case, I feel like I was too greedy since I should have sold at 9:31 or 9:32, but I was waiting since Tim said his target was about $4.

    Anyway, I’m not bashing your strategy, Tim – just asking for any advice that might help me since I’ve had similar problems with a few of your alerts now.

    Thanks,

    Michael

  • http://www.timothysykes.com timothysykes

    mcmike, u dont need to wait for alerts if u learn the strategy yourself…thats why i have dvds and live seminars…my alerts should NOT be followed, they are just a guide on how to do this…when u see MERc spike to 3.70 on light volume, take the damn profits

  • mcmike2099

    Thanks for the response, Tim. I have in fact signed up for your next seminar!

    I just figured that I couldn’t be the only person who actually followed your alerts exactly, and wondered if others might know something I didn’t or be able to recommend something to help me.

  • preston

    mc, I sold when it never crossed 3.70 and got out at 3.62ish. I guess sometimes you just have to know when to sell.
    What happened to you happened to me on another stock when I first got in, I have learned that when it stalls Tim is probably entering his order and it’s time to sell. It sucks to watch a gain go to a loss no matter how small the gain looks at the time.

  • richaholes

    got in late, didn’t buy many shares (kicking self)…made $170 total
    ah well, cash is cash ;)

  • http://www.ContiCapitalInvestments.com cconti75

    My first 2 Tim Trades. In MERC@ 3.44 out @ 3.43 for a -$29.63 loss(too slow on exit). In RODM@4.86 out@ 5.46 for a $159.03 gain. Net $129.40 gain. Thanks Tim!

  • phil_d

    Got into MERC at 3.43, sold at 3.42, didn’t catch the spike to 3.70
    Got into RODM at 4.84, sold at 5.59 – 15% profit on this one.

    Total profit from both trades: $568 after commissions

  • darkblue

    Tim,

    Got in MERC 2000 shares @3.40…out @3.59 ..$370 profit…Thanks again Tim. Now I am at 7/7 on Timalerts. I received alert on RODM when I was at lunch. It was already up . So I decided not to chase.

    mcmike,

    You are right, Everytime I receive TIm alert, I have to log in and place order.By the time I do that, It would have already spiked. This time by the tiem I logged on the price was $3.37, By the time I click submit, It was $3.40. Then i put sell order @3.50.Some how it did not sell all the shares. It sold only 50. This morning as soon as I receive Timalert, I was on my zecco, the bid price was 3.60, I put the limit price 3.59 and instantly put the order, it was executed immidiately, otherwise I would have sold it for loss.

  • http://www.jawaexpress.com enslavedbynumber

    + 400ish on RODM, +200ish on MERC. nicee….. thanks Tim!

  • ehrof

    Got in late at 3.46, but sold (before i got the alert) at 3.70. Made a sold $180 on $2,500 investment. Owned for all of 10 minutes of open market time.

  • ehrof

    Got in late at 3.46, but sold (before i got the alert) at 3.70. Made a SOLID $180 on $2,500 investment. Owned for all of 10 minutes of open market time.

    (oops, spelling error)

  • Atlantis

    + $1,600 on RODM