The Dangers Of Shorting Hot Oil Stocks With Absurd SEC Rules, A Lack Of Discipline & A Tiny Account
Posted by timothysykes on Wed 21st of May, 2008 04:34:42 PM
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That title is just about the worst combo there is and yet I went full steam ahead, shorting 1,000 FPP five minutes after the market open into a spike I thought to be ill-fated. Nearly right away when I was down 20 cents on my position, I knew I’d screwed up. Despite my warning everyone about the dangers of shorting these rocketships before they go red and the fact that I made the exact same mistake just two days ago, I even refused to take a $150 profit, instead wanting more, almost inevitably getting squeezed for a $600 loss.
I guess it’s true what they say, you can’t t each a greedy Jew new tricks.
I explained my rational for breaking the very rulesI created to protect myself the other day—not that its much of an excuse—and today was no different, except FPP was double the price and I got squeezed for double, 50 cent/share as opposed to 25, too. Fitting, right? Again, I was right about the morning pullback after the spike, it just happened $1 higher than my entry!
(Soooooooo much better to go long these things, but here’s another new twist to the problems caused by the SEC’s absurd pattern day trading rule—since you can’t go in and out, in and out, in and out of any 1 stock over one five day period, my specialty is going short and I don’t think these runs can last another 5 days—if I buy for $1-2/share gains, which is all I’d be comfortable doing, I probly wouldn’t be able to short them when they crash. And due to my skillset, I’ll be very comfortable holding these suckers for $3-5/share on the downside. So, forget about me whining about not being able to trade, now I gotta whine about being forced to play these stocks only from the short side!)
But today is just a typical amateur mistake created by me wanting to get back to even for the month (horribly typical trader emotion, now down 4% booo hooo you little bitch), getting too comfortable shorting this supernova pattern (over the past few months, each time shorting after this many days would’ve worked, of course this is why commodity plays are different!!!) and the fact that the spammers like KYUS, FOUR and FORC aren’t collapsing like normal so there’s really nothing else to play.
And that’s the key to avoid making similar mistakes—come in with no expectations. I built it up in my tiny brain that these commodity plays will fall apart and I have to profit from it. Blog post after blog post, I’ve been saying, watch these stocks, today they could/should fall apart when in fact they’ve showed no signs of true weakness whatsoever. It’s a testament to my taking quick losses that after being so wrong so many times in a row now, I’m only down $1,500 or so off my highs.
So, do me a favor, if you must try to profit from these potential quick morning drops—which I don’t recommend—it’s far far far far far better to short a strong stock’s that’s gone slightly negative on the day as you would’ve made $2/share on BWEN, $1/share on HYBR and 50 cents/share on KUN, MMGW and CPSL before some of them bouncing.
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TIM Trades
View All| Date | Stock | Buy | Sell | Net |
|---|---|---|---|---|
| Nov 20 | STXS | $3.21 | $3.48 | $813 |
| Nov 18 | PERY | $4.68 | $5.00 | $640 |
| Nov 11 | IIJI | $2.79 | $2.95 | $442 |
| Nov 6 | CVI | $4.42 | $4.70 | $530 |
| Nov 5 | MECA | $3.68 | $3.95 | $490 |
| Nov 4 | CVI | $5.18 | $4.94 | $472 |
| Nov 4 | CVI | $4.83 | $5.01 | $333 |
| Nov 3 | NAK | $3.30 | $3.37 | $157 |
| Oct 31 | IDAE | $2.18 | $2.18 | $20 |
| Oct 30 | HSNI | $7.37 | $7.86 | $561 |
| Oct 29 | EVC | $1.97 | $2.70 | $1439 |
| Oct 28 | HSNI | $6.92 | $7.30 | $540 |
| Oct 28 | HSNI | $6.20 | $6.00 | $320 |
Total: $35,854 (189%)
Great read Tim… I have to ask, do you reference any of your potential trades against Bollinger Bands?
Tim, why not do what you said and just sleep till the afternoon after your morining post. Most of your good picks have broken down over multiple days so even if you miss the big breakdown early you can short late afternoon/close and still profit safely over the next few days.
Come on Tim, we know you’re doing it on purpose to teach us! What’s 18k when you know that the first millionaire you make will donate at least that much to you ;)
I know I would…
Tim, anything else come up on the screener?
New site looks fuzzin sweet TIM!
Jesse I actually like that idea of giving Tim a donation! Tim…I know with your help I will become a millionaire and as soon as I do, I fly to New York, treat you to a restaurant of your choice, and make a donation! Ive already become a better trader and I am very very appreciative of your teaching me. The knowledge you share with us is absolutely priceless!
this niche is played by morons and morons dont know bolinger bands.
davey, i would sleep til the afternoon but i got too much work to do!
jess, not doing it on purpose, just showing all the risks and rewards
dano, about 50 stocks, blehhhhhhhh
fous, thanks bud!
Oh Tim…Mets or Yankees?
made a few gutsy(stupid!) plays today in my WSSuvivor account.
short mxc at 51.77 covered at 51.05 470shares gain of $388.4
short royl at 6.03 covered at 5.71 3500 shares gain of $1120(lucky bastard)
would have been a nice day for my account but I have CELG,GOOG going long which both got killed. Still up almost 15% since the competition started
i dont give a shit about sports
oh ok.
I second that lack of shit giving…though…women’s volleyball is nice (the fake, non-competitive beach kind with two pieces) :P
Just sent my check for funding my TOS acct on overnight Fedex, hope My account is ready to trade before pdo and mxc fall of the cliff.
WIll keep my IB account as well, that way I can “close a position” without incurring a PDT by taking the opposite side with the other broker and closing both on the next day : )
Not to do all the time, double transaction cost, but will help me when I am close to my limit, once I break 25k will be no need.
awesome shorty, u better have used me as your referral, it’ll cut into my stupid losses
Thanks for the insight
its tough to just sit and wait but I am guessing that’s what being more discipline is all about. We have to see where these energy plays are headed because right now I have no clue. no signs either way. anyone else?
I used you, Tim, they ask you “how you heard about us” and there is a drop list with a zillion names, found yours and clicked.
NOW…… Where are MY Timbucks?
haha shorty… just overnighted my funding check to TOS as well. The race is on!
I am gonna need to whore myself out to some fatties to get some money to trade with… sigh…
cool thanks shorty, timbucks will be here soon, coding them is a bitch
check out GBR, changed their name to “Concept Energy” now up 35% afterhours LOL
wow! craziness on the GBR.
Tim, SEC rules cap off us small timers, but you have more than 25k. Why would you limit yourself?
i limit myself to bring attention to this problem, nobody else with any experience/exposure will do it cuz to them the little guys don’t matter…trust e, it’s not cuz i enjoy it down here, missing plenty of great intraday patterns to focus on 1-2, such BS, gotta change it!
GBR might have to go long on this
http://www.businesswire.com/po.....p;vnsId=33
Your right Tim, thanks. With out see you on Wall Street Warriors, I wouldn’t have known about short selling.
One day, I too will be a Jedi Knight.
Tim, FCCY or somebody let me know what you think.
Tim I’m doing some stock screening and would it be profitable to short the stocks that have negative year to date?
I’m just trying to find an edge.
Take MRCY for instance.
Wow I didn’t know we get timbucks for opening a tos account? I guess I’ll have to open another one.
getshorty, im using IB as well…any problems getting stocks to short?
Any hunches when FPP and MXC will crash? They are waaaay overpriced! My TOS account is locked and loaded ready to get out of my long and into a short position for both stocks.
Tim,
I can see you’ve been very frustrated at your breaking your cardinal rule of not shorting until the afternoon (preferably when a stock is red), have you explored a little more deeply as to why this has happened a few times?
There was an interview once of one of the world’s greatest online poker players who always tries to ask himself “why” he did what he did when he makes a mistake. Doing something like this during quiet moments after the fact can require some painful soul-searching, though….
BTW, I am too scared to short any oil/energy stocks right now. I’m all in cash because the rising tide of oil price fundamentals may very well be working against technical traders taking short positions. This is not to say some good gains can be scalped from trash stocks in the industry, but it will be tougher…
Why? Because the world may possibly be at the Hubbert’s Peak of Oil Production right now..
http://en.wikipedia.org/wiki/Peak_oil
Still a faithful and loyal reader of your site, you have too much to offer everybody to let a few mistakes get you down.
What indicators will you guys be looking at to determine if MXC and FPP will being its fall? Volume?
That’s a good question - I’d like to know the answer as well.
Personally I think we play FPP (at least) like Wes did yesterday and today.
Wait until morning rolls around, it’s getting action after hours and I’m sure it will spike in the morning. Have a set number (a reasonable one) and sell it when you get to that…especially if it’s hovering.
I myself will be happy with a $1 gain in the morning…I’m not going to get greedy on it.
fantom, i dont try to find an edge, soo many stocks out there, i just try to keep it simple and say, wait a minute, this company is crap, it shouldnt be up so much. thats it. then its just trying to stay disciplined and stick to patterns that have worked
Lack of a regular sleep pattern will mess you in lots of different subtle ways. Jesse Livermore always kept regular hours, got to bed by 10pm, and took vacations in Florida and the Jersey shore when he got too stressed.
as i posted before, i’ happy for wes, but no way in hell do u continue buying these stocks each morning, soon they’ll dump and have monster reversals.
what i do to look for those reversals is a wall of sellers, where it looks like they can’t just keep going higher as if the prices are a warm knife going through butter. reversals are much much easier to spot in the afternoon, but are quicker/more dramatic in the morning
yah def, lack of sleep is a part o f it, but JL never tried creating a blogging empire!
Schmuck, I called Interactive brokers the day before CNEX collapsed in order to reserve shares to short, they told me they don’t do that, then, when CNEX collapsed I saw the whole thing, tried to short like crazy and didn’t got any while bloggers here were laughing there way to the bank. That trade would have made me anywhere between 1-2 k.
Really pissed me off, tried again yesterday to reserve shares of PDO, MXC and FPP, same shit, I didn’t wanted to short those today, but tried putting high sell limits and got the message that there were no shares available, even after I confirmed last night there were several thousands available of PDO.
Hope TOS has much more availability, no sense in focusing on Tim’s shorting strategy and then don’t be anle to short on the best moment.
Would keep IB account open so I can cancel out positions with both brokers and avoid PDT, once I have enough money will kiss IB goodbye.
THey told
TOS is great for many reasons- but customer service and available shares to short in the a.m. have got to be the top two! I also have a TD Ameritrade Apex account, but even that won’t give me the ability to short the number of stocks I’ve been able to with TOS. For anyone new, TOS is Thinkorswim.com I gave Tim the referral about two months ago. To date, I’ve been able to short and profit on CNEX and KYUS. I’m still holding my $38 MXC short from yesterday- not too worried, it’ll tank past that eventually. Tim’s right though, you have to have patience and capital to hold through this mess.
wow, I thought while I was vacationing, I was missing out on PDO, MXC, etc. etc. well, I see that I didn’t miss much… and while traveling, I was feeling the sting of how expensive gass is now…
I will start trading again tomorrow…. will eye MXC, PDO.. THis site looks great
Tim you said:
“check out GBR, changed their name to
good job mike, too many comments these days to keep track of…too many plays too
getshorty…i have the same experience with u with IB. they are real cheap to use transaction costs-wise, but their service is crap! i have a few trader friends who recommends me TOS as well, think i will sign up once i gathered enough funds.
Anyone experiencing lag when trying to exit/sell a position with TOS? Couple days ago I placed a sell order but it took like 5 minutes to go through!
How far up is this oil going? Oil hitting $135 after hour, probably will reach $140 tomorrow. And all these crap FPP, PDO, ROYL, MXC etc. are again on the move upward in afterhour market! MXC still not available anywhere to reserve, but that one freaks me out, $15 up in a heartbeat! PDO and FPP probably are more comfortable to short, yet they also moved 35-40% for the past few days.
Tim anything wrong with shorting on the Nasdaq?
ASFI is down trending, what do you think, anybody?
Added a post regarding SINO might be worth a watch
http://www.investorslive.com/blog/
Wake up guys, money never sleeps. I’m the one that has to go to work in the morning.
http://money.cnn.com/news/news.....b720e9.htm