I decided to start this series off with a recent winner from the start of our current downtrend. Why I want to start with this is to teach you how to not mismanage a short. This short in a short three months and two weeks returned a very impressive 49%. This was a nice return for a short. However, this stock was handled poorly. I covered my final shares on 5/16 when the stock closed above the 50 day moving average. I should not have done this and with a near 50%+ gain should have used a close above the 50 DMA on HUGE volume or a close above the 200 DMA. If I would have handled that correctly from the time I went short to 11-20-08 the stock has fallen 81% which would make it my top current short holding at the time of this publication.
The key to going short this stock was that it was a former “high-flyer” from 2003 with a gain over 600% from the proper breakout to the top in October, the stock rolled over with heavy distribution, it broke down below the 50 DMA, and then broke down below the 200 DMA on strong volume. On the day of the breakdown the stock closed near the low of the day and BOP went red making it a very strong candidate. It worked out but it should still be a short as of November 2008.
the short signal:
the profit taking low: