I’ve been saying it for a while now…
The market is overextended.
Normally that would make me extremely cautious.
But it hasn’t yet.
Why?
Overaggressive short sellers creating one opportunity after another.
And with their help, I was able to nail two trades on Friday in the tickers AAOI and TUP.
Of course, I love poking fun at how miserable of an existence these short sellers live…
But on the other hand, I appreciate their complete and utter disregard for risk management and boneheaded decision making because they are helping me rack up more profits for me to donate to charity.
Here’s why you need to pay attention to short sellers and how I use them to siphon profits off them.
Table of Contents
The Dual Faces of Short Sellers
Short sellers often portray themselves as heroes, exposing the flaws in companies, and saving investors from bad decisions.
However, trader’s they seem to forget one key variable: Trading is not the same thing as investing.
As a trader you must take risk management into consideration, rely less on the fundamentals and more so on the price action.
Short sellers argue they are doing the world a favor…
But their jaded view on the world…and more so…their over aggressive trading behavior is what’s fueling some of the best squeezes in the market right now.
Remember that just because short sellers claim "manipulation" does not mean there's any actual manipulation, they're just insecure toxic lepers trying to protect their fragile egos. You can ignore them, laugh at them or better yet ride the squeezes they create $TUP $YELL $AAOI
— Timothy Sykes (@timothysykes) August 4, 2023
Confessions of A Former Short Seller
Back in the day I used to focus mainly on shorting pump and dumps.
At the time it was a rather unique strategy.
Short selling was once reserved for professional traders…but with my growing popularity I made it sort of mainstream.
And that’s where I messed up.
You see, so many traders started short selling crappy companies and it made the strategy harder to trade.
In fact, the risk vs. reward skewed and it no longer made sense for me to trade it.
I evolved.
But so many traders haven’t.
Just look at some of the squeezes we’ve seen lately:
MF: +300%
AAOI: +63%
TUP: +44%
And that was just last Friday!
WOW you gotta love this $TUP squeeze on debt restructuring, nearly a 100% move off the after-hours lows, the latest example of how being a short seller sucks the life out of you. I know how tempting the dark side is, but you must try to avoid it, it just sucks so much LOL
— Timothy Sykes (@timothysykes) August 3, 2023
By the way, I love trolling them because I want them to unravel and trade on tilt.
Their reckless decision making is what’s helping me have some of my best trading of the year.
LOL.
Behind My Trades: A Glimpse Into AAOI and TUP
My recent trades on AAOI and TUP perfectly illustrate how understanding short sellers’ aggression can lead to profits.
For example, TUP traded as high as $7.25 in the after hours on Thursday.
But I waited for a dip on Friday to get in.
I got in at around $5.08 when I saw there was panic selling off the highs.
I was able to exit cleanly at $5.26.
Which was the right move because the stock did get to the $4.60s.
I like quick hitters when I’m trading super volatile stocks.
In addition, if I have a better read on a play, I won’t hesitate to get back in at a later time or what I think a better price is.
Heck, I traded TUP several times last week waiting during panic sell offs and bought the dip.
Each sell-off traps the shorts and puts them in an even worse position…how else do you explain a stock that goes from $0.61 to $7.25 in just a few trading days?
AAOI is another symbol I have been trading a lot lately.
It has gone from $5.86 to a high of $11.29 in a few trading days.
I love the chart on this multi-day runner, and like TUP, I’ve tried to buy on weakness.
Last Friday I saw an opportunity to get in when it was trading $1 off its highs, getting in at $10.33 and out at $10.49.
That’s what I call trading like a sniper.
I’m not one of those traders who picks tops or bottoms. Heck, sometimes I don’t even catch the meat of the move.
But if you’re patient, you can have some great success if you focus on risk management.
I know, because I’ve made nearly $7.5 million in trading profits by using this style.
And like I said earlier, if I get a better read on a play, I won’t hesitate to get back into a stock.
What’s Your Next Move?
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