Two New Short Positions For Thursday’s Market Session

October 24, 2007

Both of these shorts will be small, like all of my shorts have been. I am still testing my toes in the shorts water to possibly land some nice winners as this current uptrend is very mixed with many stocks moving lower despite the markets higher prices. I don’t recommend anyone that has not made money on the long side during the past year short stocks. Only those that have made money on the long side should attempt to trade on the short side. If you can’t make money on the long side, trust me, it is going to be hard to make money on the short side. Keep these shorts small. They will be under $1k each-which is a very small portion of my portfolio.

new short positions: MDU ORLY

MDU is breaking down below the 50 day moving average after failing the 200 day moving average, on very strong volume. This stock topped in April and has since entered a solid downtrend that has seen strong distribution and red BOP from June to August. After breaking down below both key moving averages, the stock tried to regain its uptrend by retaking both of the moving averages in October. But the rally off the August lows was on very low volume compared to the selling that preceded the rally. The stock has now rolled over on extremely strong volume (best viewed on a 2-day chart) with BOP going red today. The RS line is not hitting new lows ahead of price which is a little disappointing, but if the stock continues to selloff, it appears the RS line will hit new lows ahead of price–a negative divergence and good for our short position. If this stock doesn’t work right away, make sure to keep your cut loss tight since it pays a 2.2% dividend. Cut your first loss with a close above the 50 day moving average and your final loss with a close above the 200 day moving average, if the stock does not move lower immediately.

mdu1024__Large_.PNG

ORLY is bouncing down right off the 50 day moving average after failing to move back above the 200 day moving average, on strong volume. This stock put in a double top in a very volatile manner in August as the stock sold of in July on very heavy volume leading up to that final top. The stock then bounced around the 50 and 200 day moving average, going over and below both lines over nine times. Each time the stock went higher it made a lower high and the last leg up barely made it over the 200 day moving average this time in October. The stock is now failing at the 50 day moving average on very strong volume and that combined with the rolling over pattern of the stock the long term daily posted increases the chance of this short working out. I wish the RS line was below the late September lows with the price slightly lower. However, when you look at the RS line and where it is at compared to the August lows and then look at the price you can see that the stock is weaker than the overall market the past few months–bearish divergence, bullish for shorts. Cut your loss with a close above the 50 day moving average, if the stock does not move lower immediately.

orly1024__Large_.PNG

Last 5 posts in Free Archives Shorts

Posted by Joshua Hayes | Filed Under Free Archives Shorts 

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