I Have The Dark Gift: Why I’m Better At Shorting Than Buying
Posted by timothysykes on Wed 13th of Feb, 2008 07:05:26 PM
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After posting some potential plays and declaring I’d play none of them because of all media/speaking (the stuff that actually helps pay the bills while TIM is soooo tiny…for now) I’ve got to do, two plays acted nicely, so I couldn’t help but jump in.
First up, I shorted 1,000 shares of Spacehab (SPAB) at $2.10. I had looked to enter around $1.80, but wisely did not as it spiked above $2, squeezing several early short sellers.
TIM Lesson: Never short into a stock just because you think it’ll go lower, wait for the price action to give you the best possible entry.
It’s risky to short into afternoon bounces—especially when you know you’ll be away from your computer the next morning—but since this company is such a total POS, I felt right in my entry and would be willing to average up tomorrow or the next day. The stock held up stronger than I expected, so I became slightly worried and the list of chores I had to do piled up in my head—there was no way I was gonna hold this sucker overnight and risk a 30-60 cent spike that I wouldn’t even be around to short or cover into.
When the price dropped 10 cents, I said screw it, decent gain, I’m out, covering all my shares at $1.99, profiting by $100ish. Sure, it dropped another 20 cents over the next hour, but I got a lot of work done in that hour and this goes to show you that shorting into smallcaps spikes, while scary, is a solid strategy, especially when the volume begins to fade. After all, there’s lots of bitter shareholders who drank the Kool Aid at higher prices and look to get out on any bounce. I was off on my entry by 5 cents and my exit by 20 cents, so this trade—in the hands of a better trader than me—would yield 35 cents/share, or 15%. Not bad for an hour’s work.
What I did right: shorted into an over-extended smallcap spike that was on the 2nd day of its runup, ignored the sugarcoated hype about a possible NASA contract
What I did wrong: shorted and covered too early, traded while I knew I’d be limited in being able to watch/trade the stock the next day
Lessons: Never trade when you have time restrictions—it influences your outlook considerably. Once in a trade that is your bread and butter, relax, experience teaches you the odds are on your side. Always look to short on the 2nd, 3rd or 4th day of a smallcap spiker with a strongly bearish chart—should wait for sideways action first though
How I celebrated: worked on my Trader’s Expo speech
Near the market close, I also saw Converted Organics (COIN) breaking past the $10.50-$10.70 level it’d previously tried to breakout of no less than 5 times over the past few days. I’d missed the runup from $10.40 to $10.90 (working on my speech, not looking to trade), but I figured if it held the multi-day breakout, it’d be good for an early morning gap higher past $11 and maybe more. Eerily similar to my failed CTIB trade, but I bought right before the market close, buying 300 shares at $10.77. I figured there was little risk of losing more than 10-20 cents/share (considering I’m not leaving until 8:30am tomorrow morning and that 30 minutes of pre-market trading is more than enough time for it to gap and spike or do nothing).
The stock closed right near my purchase price and within a few minutes after-hours, it was up 10 cents. Things looked good, but then all of a sudden, the price dropped to $10.30, then $10!?!?! No news on the wires, WTF? Within minutes, the message boards began posting the SEC filing that said shareholders were offering 750,000 shares for sale. No matter if this would be slightly or big-time negative, it would certainly prevent the stock from breaking out, aka the only reason I bought in. Screw that, I needed to get out ASAP. Tried to sell my 300 shares at $10, but missed that buyer by a split second and had to settle for $9.92.
Nasty $265 loss, but I’d do it again because negative overnight news isn’t as predictable as a chart breakout. Yup, you read that correctly, since my trade was based on solid price action, the odds were on my side and 6-8 times out of 10, I would’ve won. Losses are tough to accept—well, not for me anymore, I feel nothing, for better or worse—but I got out nearly immediately because my thesis was busted. Exit looks good as the stock is now $9.50—who knows if it’ll bounce or not, highly, highly doubtful it’ll get back to $10.75, so it’s a busted breakout and lower single digits look likely (although not high enough probability to short here either)
What I did right: Bought into a multi-day breakout, took a small position considering smallcap breakouts (YTEC, SOLF, CTIB) haven’t been doing well lately, cut my losses quickly
What I did wrong: I’m filming tomorrow morning, I shouldn’t be in any trades (moron!), didn’t wait for a new all-time high to buy (which the after-hours news would’ve crushed anyway), procrastinated, wanting $10.10 or $10.20 instead of $10—costing me an extra $25 in losses
Lessons: Don’t trade when you have time restrictions!!!!! After my last 5 trades—all non-Supernovas—TIM is right back to where I was after IDMI (my last Supernova-esque trade)—what does this tell everyone? Exactly, this is why it’s critical I have more patience and wait for those beautiful babies to show present themselves, rare as they might be.
How I celebrated: wrote this post
Check out my brand new DVD, ShortStocking - the only guide you'll ever need to profit from short selling!
Tim, just FYI, that COIN news was old: http://biz.yahoo.com/e/080129/coin8-k.html
But to be honest, I didn’t notice it either :)
I don’t care if COIN news was fake and put out by a short seller–it influenced the price so I reacted. This is the main problem traders have, they form opinions and attachments. I think COIN is a total POS, but it doesn’t influence my trading at all. I don’t care, I buy on breakouts and short sell breakdowns, the more perfect the pattern, the greater position I have.
ACLS looks like a breakout. What direction would you guys go for this one?
ACLS waaaay too much resistance all over the place to the upside, try to fins stocks making new highs like VSCI
Tim, it seems like for you as well as myself it is tough to stay away and not trade. But the supernova patterns are what made you a millionaire in the first place, so I’m going to try and follow that advice and be patient.
Tim, I do the same thing time and time again. There is a very specific situation, feeling, sense, occurence, allignment of the planets, etc…when you KNOW KNOW KNOW that a trade is going to make you money. Nothing like that feeling..you just know its right. Those are the rare trades that build an account up over and over. It’s the every day need to and/or want to trades that tear an account apart. You know those rare beauties aren’t even really that rare are they??? Get at least one a week don’t we??@@!!
Rich
What do you think of NCEN? It’s a developmental wind and hydro power play.
NCEN, probable fraud, getting pumped by several newsletters, scary to buy
GM all.
Time to watch the $7 level for DNDN. News popping it today and a 42% short interest in the stock. The short squeeze could be mammouth depending on how seriously everyone takes the news.
Tim, funny all three of those came up on my screens and I have been in and out of them. I saw VLNC this morning - looks like it may be breaking down. What do you think?
so I shorted UBS at 3pm yesterday because earnings would blow today. I did the same with C and MER and got a nice 5% doing jack shit. My concern is if i should let it wait throughout the day or just take a 5-6% hit at market open and be happy with it. Im siding with the latter because the market is poised for an up day.
- meaning i did the same with C and MER in Jan shorting before their day of their earnings and covering the day of earnings.
I put all my eggs in one basket
shorted UBS @ 37.05
covered @ 34.73
easiest money i ever made (5-6%) profit gain :-)
figures its down to the 34.50s though. oh well good enough
What do you think of ICO? It was able to break $7. I will buy if it can show strength into the close. POS company but coal is hot!
Tim, do you still think COIN is a possible breakout now that it recovered?
Also, what do you think of YGE? Possible gap up tonight with earnings coming tomorrow?
IDMI is 28% today. I can’t find any news. Anyone have any ideas. Could be a nice short ?
IDMI broke resistance in the 2.50 range next resistance is 2.75..
tim am I reading these charts correctly?
does that mean pos breakout or good short
Steve,
I very new at this. The way I see it is a breakout @2.50 to 2.80 which is now resistance. If it breaks
2.80 next resistance is about 3.00. As for your question I think it has to go through support which is
now 2.50 to become a short you could relax with.
Tim,
Can you confirm this or am I way off.
2.90 now. wheres tim we need him
in the middle of filming my CBS News interview, no time to check the charts, what am i missing?
Tim,
We need a Tim lesson on IDMI .. see last few posts.
No need for Tim. If you can find shares short IDMI and short it hard.
I can’t find any either.
I’m not touching IDMI until $2.70 if I can get anything it’s really testing $2.80 if it can break through either of these it could go down for a while, guess we will have to wait and see.
IDMI does not look liek a short here, yes it could go down, but where to—support at $2.40. Just as likely to squeeze early shorts to $3.20 and maybe more. bad risk-reward. wait for signs of fading first, right now i just see higher intraday bottoms…remember the best opportunities come about when others are panicking…hope to be back before the close…wait til u guys see this interview sunday morning between 9 and 10:30am, its awesome
Timmy,
Congrats on the interview on the cbs sunday morning show that’s a big deal. It’s also a pretty good show, I try to catch it if I wake up early enough. What’s the premise of the interview?
really gotta learn to take my own advice, shorted 1k IDMI at 2.91, another 1k at 3.23, average of 3.07–no matter what happens this is a bad trade, didn’t wait for signs of cracking, too hungry for profits, the overall market tanking might save me but learn what not to do!
covered 3/4 of my position for a 12 cent loss, not too bad, stupid, stupid trade though
Just shorted 200 EYE @23.04
Tim…thinking of switching over to TOS. I know you really believe in them and thats great! Have you ever had any problems finding shares to short with TOS? IDMI was impossible to find shares for me to short. PS…I’ll mention you as a referral when i do switch!
Should wait closer to the close to short EYE. I’m also thinking about shorting AMKR. I don’t know what I’m doing but would those be considered good stocks to short?
why short EYE or AMKR–both charts look verrrrry bullish
I guess so. s#$&
With Sterling software I succeed to short 1000s of IDMI at 3.33 four minutes ago
Goog thing I held onto 1/4 my position, covered it for a 17 cent gain, wiping away most of the losses
Like I said in my post I don’t know what I’m doing. I was looking at the 6 month chart and they looked bearish and ready to bounce back down. Should I only be looking at the 1 month, 1 week, the day?
Should of waited for EYE to drop through 23.00 before shorting.
reshorted 1,200 at 3.02, gonna hold overnight…can u say addicttttt
XIDE
anyone think it;s going to continue down to the 9’s?
Damn guys! How do you find big moving micro stocks like IDMI!? I wish I could have rode on that wave for a bit. sigh
EYE - I shorted EYE because it is up 10% on the following news.
Advanced Medical Optics said its fourth-quarter loss widened to $12.3 million, or 20 cents a share
Analysts expected earnings of 39 cents a share on revenue of $313 million.
The company cut its view of 2008 performance as the deteriorating U.S. economy will negatively impact domestic LASIK procedure volumes
It also plans to cut approximately 150 positions, or about 4% of the company’s global workforce, in a bid to save $10 million to $12 million a year; it will take $25 million to $30 million in charges on the job-cut plan.
I cover too early my position. I will see tomorrow if I want to short again IDMI even if it should open in gap down in my opinion.
never ever short earnings plays–everyone has different expectations. look at bidu, common sense would tell u it should get crushed after guiding lower and being priced so highly. expectations…expectations…and those arent in any PRs, they’re just reflected in price action
Tim,
I guess I have to watch the DVD again.
Well I have EYE in my account over night.
i have to watch my DVD too, godamn i’m undisciplined!
as for EYE, why in the world would u short it? just broke out today (1st big up day) of a nice multi-day, multi-month base on strong volume and earnings. the DVD preaches only shorting stocks without news, that are up exponentially over the past few days and are rolling over
i understand your reasoning, but i think this is a typical exception. it has been a way too predictable trend when these financial corporations post their earnings and officially announce 10+ billions in write downs. its an easy 5 - 8%. i would have done it in no other instance but these. for the last 2 quarters C, MER, UBS, and maybe BSC and others have followed this to a tee. too bad thought because after these two past quarters it probably wont happen again and become the typical earnings guessing game you mention.
Tim,
I was just looking at todays news and stock action. Dumb huh
How did you short SPAB, no broker I know of lets me short anything under $5….Thanks
lol. comedy hour on timothysykes.com