I tell you what, for the first time in a long time I decided to watch the market intraday today as I had a rough time sleeping after working last night. Boy did I pick the wrong day to watch the market intraday. Not only were there absolutely ZERO longs in my two most active long scans after the first 2 1/2 hours of the trading day, there were only like 3 shorts in my list. So as the stock market started to tack on small gains I decided to take a nap and see how it played out. Well, I sure did miss some excitement. It seems that the markets inability to hold the day’s gains seemed to freak out the big boys (funds go to work during the last hour of the market session so it is their buying and selling that dominates that time frame) during the final minutes and they proceeded to dump stocks into the closing bell. This late selloff ended up putting the final touches on the negative reality that the perma-bottom callers seem to be going through constantly throughout 2008. If it wasn’t bad enough that they tried to call a bottom in November of 2007, or March of 2008, or even most recently after the follow-through day (the market is down between 10 and 13% since then), they still refuse to even admit they are still wrong in playing this game. Their pain is our gain as we continue to ride the trend. That trend is clearly lower and look at what it did for us today. We finally have our first 75% winner on the short side with CETV’s swoon lower today. From 7/14 to now, in a short three months and two weeks, we have been rewarded with our first 75% winner (now up 77%). I have no clue why the morons who read my blog prefer to lose 40%, then make 10% on a bounce from a broken stock, and then lose that 10% gain as it falls back to where it came from, instead of going short a perfect breakdown in a stock that clearly went too far up too fast in the last bull market. Even though this was a great stock, there is not a single stock that can move up 281,000% in seven years and hold those gains. Every stock returns to Earth. Right now, most stocks have gone down too far from their proper breakdowns to be safe and solid shorts. If we were to go short any of the 21 or 7 stocks in my two main short scans, we would probably make very little money or lose a lot of money. Why? Because they have already worked too well. They are already down too much and thus are prone to sharp oversold short-squeeze rallies. Making money on the short side is a very lucrative way to invest in a weak market but you must know when to short and when to sit on your behind and wait for correct setups and/or hold your shorts solid while they make profits. Right now, I am still short 24 stocks that ALL have gains to VERY STRONG gains for me. I have covered a lot of my short positions to lock in gains but as long as the market is sold like it is being sold I will continue to hold short some of my positions instead of fully covering every single one. For instance, let’s say you went short 100 shares of AAPL with me on 4/9 and added another 25 on 9/9. If you then covered 25 shares for a 35% gain on 9/29, you not only took in some nice profits but now you still have your core position in case it keeps going lower. AAPL continued to go lower and on 10/6 I sold another 10% for a 38% gain. As of right now, AAPL is still well below the 200 day moving average and is still below the 50 day moving average. As long as this stock trends below these averages, and even if it gets above them if it is on low volume, I will continue to hold this stock short. Right now I have a 43% gain currently, if I were to sell now. For those that are new and do not understand how to take profits on shorts, you obviously must take profits when you get big moves lower after a LONG downtrend, like CETV today, but you also must take profits along the way if the stock falls hard without giving any clear “profit taking signals.” So let’s say AAPL sells off to 10 without having any big gap’s lower on huge volume. What I would do is take some more profits with a 50% gain, then if it is down 66% I will probably take more, then if I can get it to fall 75% I will then take a lot of my gains, and then if the trend is still down and the chart is real ugly I will hold the last 10% to 33% until I can get that 90%, 95%, or even that magical 99% gain on my short. So even though we have nothing new to short, this lesson should have helped make you a better short seller as now you know how to take profits on the way down when the stock gives very little “clear” sell signals. A lot of fools bashed me the past week telling me that I was crazy to be short. But when I am taking 75%, 55%, and 45% partial covers for gains in the stocks CETV, CEO, and CAJ respectively, I can find nothing stupid in that. Hopefully we can get this low volume bounce to last a little bit longer so we can get better short setups where the price is right on that downtrending 50 day moving average. However, if nothing shows up and instead we start finding a ton of green to MAX GREEN BOP filled charts with strong accumulation and excellent price patterns, I will be more than happy to switch off the short selling and turn on the going long and strong, boyeee button. I love the stock market and I hope I have helped make it a bit more clear, to rookies, that are just learning how to buy and short stocks. Stay positive, remember CASH IS KING in this nutty volatile market, and there will ALWAYS be another bull market.
new short positions: none
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