I can’t lie. After a slow few months we were all sitting on our hands waiting for the ticker that ignited the market back into full flow. Surprisingly, it turned out Donald J. Trump (and $DWAC) catapulted themselves to hero for a day, ‘Making The Markets Great again’.
If you check out TradeZero’s YouTube, a hot shorts video is due out this Friday (October 29), breaking down $DWAC and its subsequent sympathy opportunities: $PHUN and $SALM.
On a side note, sometimes the best trades are those further afield from the noise. $DWAC drew the crowd and built volatility, but often the easier plays take a bit more digging.
First Green Day Gap shorts.
This is one of my favourite short patterns ever and it’s been in full flow over the last few days from Oct 26 – 27. Here’s an example of a daily chart so you see what it looks like.
This pattern starts with a first green day, followed by a big gap up, $GHSI closed at 1.18 before gapping to the 2s. The short works because the gap has moved too far too fast. People who bought in the 1s will take profits the minute the chart starts to change direction – as they’re up a lot.
On the intra-day chart of $GHSI, you can see the gap ramped too quickly in pre-market and had to pull back from the 2.50s, before ultimately beginning to fail nearer to the open. I waited for an adequate entry, VWAP rejection looked like a good risk level, and my covers were a little early. Let’s look at another.
$CXDC is a mirror image chart of $GHSI with a slightly smaller first green day but an equally big gap. This pattern formed the same day as $GHSI, coincidentally, illustrating its current prevalence.
For whatever reason, $CXDC had a little more strength than $GHSI, so I had to cut my loss on my short attempt at VWAP, before re-attacking after more confirmation of failure. Cutting losses is essential with this set up, for reasons shown blow.
If you look closely at $DWAC, mentioned at the start of the blog, it follows the same daily structure of FGD and major gap up. The difference with $DWAC is the Trump catalyst and subsequent volume that gave it extra strength.
Once a stock gets too strong, shorts get stuck and major squeezes can occur. This is why cutting losses as quickly as possible when your wrong is an absolutely mandatory element to trading.
We can always mis-read situations or simply be wrong. It’s absolutely fine to be wrong, It’s absolutely not fine to stay wrong.
If you’re looking for a broker that specialises in short selling you can use my affiliate link to receive discounted fees whilst gaining access to the hottest hard to borrow stocks.
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