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Posted 3 months, 11 days ago.

http://www.timothysykes.com/timsykes/2008/05/20/don%e2%80%99t-short-sell-into-sideways-price-action-of-stocks-that-are-still-up-big-on-the-day/

Don’t Short Sell Into Sideways Price Action Of Stocks That Are Still Up Big On The Day!

Tags: Patience, Patterns To Avoid, Short Selling, Short Squeezes

Lots of folks either have shorted or are thinking of shorting confirmed Supernova MXC here just above $40. Their reasoning—it cracked sideways price action, mistakenly believing it to be the kind of price action I always—or at least should always—look for before short selling one of these rocket ships.

WRONG!

My kind of sideways price action can NEVER occur when a stock like MXC is still up $13/share on the day, or on FPP yesterday when it was up $1.50/share, because the longs have no fear when their stocks are solidly up on the day and that opens to the door to potential end of the day and tomorrow morning at the market open short squeezes. Because they know lots of short sellers are salivating to short these things, just as they were on MXC at $15, $20, $25, $27 (me, but I covered quickly for a-now-proven-to-be-infinitely-wise 40 cent/share loss), and on FPP at $4 (me, covered again, wisely now it seems for a 20 cent/share loss) on and on….

You stupid early shorts are the reason for these kinds of a move because you haven’t watched my PennyStocking DVD and are drawing the wrong conclusions from this blog that is no way shape or form to be considered investment advice or even the whole story for educational purposes.

Sure, you might get breakdowns, quick breakdowns to cover into, as JMoates learned scalping FPP today for nearly $2,000 in gains, but the odds are against any major breakdown because the stocks haven’t gone and are nowhere near going red on the day (FPP is right back near its highs now)

I can’t tell you how scary red numbers, meaning when a stock is down on the day, are to people who are long and up 50, 100, 300% within a few days—they start to panic, wanting to sell their shares and capture their tremendous profits. They use stop losses—which are great fun for short sellers when they get taken out on the downside as it’s like surfing a great wave of sell orders, ideally covering when the wave breaks (not that I know how to surf in real life, I’m an un-coordinated Jew)—and while you can’t predict exactly where those stop losses are, there’s a high degree of probability, it’s right around a stock’s unchanged mark on the day, usually at some big fat round number cuz they read to use those in some sugarcoated finance book written by typical industry scumbag who won’t tell you the whole truth cuz it’s dark and complex and he won’t sell as many copies to ignorant finance people cuz this subject is too unpopular (ironically caused by such sugarcoating sumbags)

Anyway, HERE is an example of worthy sideways price action…notice the big drop after the stock goes slightly negative on the day. I covered at $3, from $3.75, solid profit, but in the next 2 days, the stock went under $2.25…that’s the kind of short you want, where you can get your timing all off and you still make 20% profits.

Learn people, friggin learn!

And…when you have time, you can start with THIS totally unrelated but useful article, it’s by my good friend Dave Goodboy and it’s on a trading website that you should plunder for information.

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