Seven New Short Positions And Two Stocks I Am Adding To My Existing Short Position For Wednesday’s Stock Market Session
February 5, 2008
The market got hit with a nasty distribution day today which pretty much has erased all of the gains that were made available right after the 1/22 and 1/23 bounce. A lot of bottom-callers were for sure the bottom was in but the charts completely disagreed with them and after a low volume rally this is what normally happens. There were a ton of short candidates tonight and that should be bearish for this market as there were easily 20 stocks that could have been shorted and still had an excellent risk/reward ratio. However, the ones listed below are the weakest of them all with the heavier volume and price patterns they have developed. The best part about this list is that three Chemical stocks look like they are ready to finally break. The other stocks in the sector that I want to short did not look as bad as MON, MOS, and POT did. These three are still very close to all-time highs so if I am wrong my cut loss is clearly defined. If the shorts workout the potential rewards I am looking for in these stocks since they were our bull market leaders is going to make up for possibly being wrong. However, with the way the stock market looks and the way it reversed today I doubt I am wrong. But no matter what happens I have my game plan and I am ready to execute it. The difference between a MOS short of $25,000 and a short of MYGN of $1,000 is all due to sector participation. If you are too new to know why I am putting so much in MOS compared to MYGN or CME all you need to know is that I focus ONLY on the top bull market leaders that top last when it comes to shorting stocks. I load up on the best-of-the-best when they top. Those stocks are the chemical stocks and BIDU, RIMM, GOOG, AAPL, FSLR, GRMN, and AMZN. I might miss AMZN, but the fact I am short all of the other stocks I want to be short (minus a few more chemical stocks that have not broken down yet) and also have an extremely healthy amount of cash has me feeling extremely great at this inflection point of the stock market. I feel like I am in complete control. This is a great feeling, I must say.
new short positions: MOS POT MON CME PCU ETR MYGN
MOS is failing right around the resistance area of the old highs earlier this month, on very strong volume. This chart was in such a huge steady uptrend until just recently when the stock took off in a parabolic run into the climax top on 1/14. Two days later the stock reversed on heavier volume signaling that the stock did indeed blow-off its top and sell off below the 50 day moving average on some heavy distribution. The low volume rally is failing right near the old highs on a surge in volume with BOP staying red. The RS and moneystream are confirming the weakness in the stock and if the short is too early we have our cut loss area line clearly drawn in the sand. Cut your final loss with a close above the 110.20 level, if the stock does not move lower immediately.
POT is failing right around the resistance area of the highs earlier in this month, on very strong volume. This is almost the exact identical chart of MOS and for the shorts that could be a very good thing. The only difference with this stock is that the RS line is a bit stronger than MOS’s line. Cut your final loss with a close above the 152.44 level, if the stock does not move higher immediately.
MON is breaking down below the 50 day moving average after failing at the resistance of the highs earlier this month, on strong volume. This stock is just as toppy as the other two chemical stocks and it is a bit weaker than the other two with the stock already below the 50 day moving average. The BOP did go yellow from red today which is the opposite of what you want to see but this stock is still a chemical stock and we have multiple stop levels to protect us if the stock doesn’t collapse here. Cut your first loss with a close above the 50 day moving average and your final loss with a close above the 129.28 level, if the stock does not move lower immediately.
CME is breaking down below the 200 day moving average after failing at the 50 day moving average, on very strong volume. This stock is not as ugly as the best shorts I take but the extremely high price of the stock combined with the huge gains in this stock makes it a great short candidate. Not only that but NYX collapsed and broke down from a very bearish setup making this whole sector vulnerable. Cut your first loss with a close above the 625 level and your final loss with a close above the 50 day moving average, if the stock doest not move lower immediately.
PCU is failing right at the 50 day moving average, on strong volume. This stock has clearly topped back in October and after a nasty selloff has spent the past couple of weeks recouping some of the losses. But volume was lower on the way up than on the previous trend lower and that led to today’s failure on stronger volume. This chart isn’t horribly ugly but the failure is very clear and bearish. Cut your loss with a close above the 50 day moving average, if the stock does not move lower immediately.
ETR is failing right at the 200 day moving average, on above average volume. The stock has recently gone from a very orderly uptrend to a stock clearly topping as the early January breakout was reversed on much heavier volume as the stock cracked below the 50 and 200 day moving average. After a low volume rally to the 200 day moving average, the stock is now failing right at the moving average with BOP getting more red. This stocks is getting very heavy. Utilities breaking down in a bear market is NEVER good for the economy. Cut your first loss with a close above the 200 day moving average and your final loss with a close above the 50 day moving average, if the stock does not move lower immediately.
MYGN is reversing and failing right at the 200 day moving average after putting in a very bearish intraday reversal, on very strong volume. This stock was in a nice uptrend until October when the stock topped out very quietly and gently. After that top, the stock pulled back on some lower volume which made the stock seem fine. But in January the stock started selling off on higher volume and had a string of 10 days in a row down with BOP going red and getting more and more red. This reversal today puts MYGN very close to a possible collapse. Cut your first loss with a close above the 200 day moving average and your final loss with a close above the 50 day moving average, if the stock does not move lower immediately.
adding to existing short position: RIMM YUM
RIMM is breaking down near resistance at the 50 day moving average, on below average volume. This stock has topped in November but since then has not really offered any clear area to get short. I was very blessed and got short this on the 50 day moving average break in early January but the chart was still very green and hard to load up on. Since then I have not had another chance to get short as the stock is so weak it can not get back to the 50 DMA. I guess this point will be good enough and since it is not a perfect area to short I am going to keep it small. Cut your loss with a close above the 50 day moving average, if the stock does not move lower immediately.
YUM is gapping lower below the 50 day moving average and putting in a very bearish intraday reversal, on very strong volume. This stock has recently become a very weak chart and it is now selling off on very heavy volume with BOP going and staying red since the stock broke down at the beginning of January. Cut your loss with a close above the 50 day moving average, if the stock does not move lower immediately.
Last 5 posts in Free Archives Shorts
- Three New Short Positions And Two Stocks I Am Adding To My Existing Short Positions For Monday's Stock Market Session - February 29th, 2008
- One New Short Position And Two Stocks I Am Adding To My Existing Short Positions For Friday's Stock Market Session - February 28th, 2008
- Three New Short Positions For Thursday's Stock Market Session - February 27th, 2008
- One Stock I Am Adding To My Existing Short Position For Wednesday's Stock Market Session - February 26th, 2008
- One New Short Position For Tuesday's Stock Market Session - February 25th, 2008
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13 Comments »
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Josh, I am very glad to see MOS and POT on your list. I have been watching them very closely for the last 3-4 days and was convinced that after yesterday’s action they were very nearly ready.
I have been watching these forever and it is about time we have a bearish move that could possibly lead to some much lower prices.
It looks like now is our moment. If not now…sheesh…it should be soon!
CME too!
How much patience is required for this MOS trade? We’re getting close to an 8% loss…
FYI. Regarding POT. The POT CEO was on Fast Money this evening. He talked up a very convincing bullish story. It’ll be interesting to see if POT will get a “Fast Money” boost from that. Also, interesting to note that POT was up today on very light volume. I’m not in POT now, but I’d sure like to be on the ride when this one heads down. Josh - was there anything to be learned from the POT light volume action today ? (I don’t have after hours info, so I wonder what it’s done since today’s close.)
how much patience….uhm, did you read where to cut your loss? i am cutting 50% of MOS MON and POT. What can i tell you bro…I am not God. They don’t all work? amazing.
did you see the gains in MTL JRCC CREE CHDX. :)…if you did, I dont think the one not working would bother you so much. Hopefully, you are not a donkey newbie and you did not load up. I told you there were problems with it not yet being under the 50 dma. it might not be time yet…it could be the next. but while you cry over this short not working…stocks like MTL move up 10% in one day…which is obviously the long we were focused on this weekend.
the tone in your voice sounds VERY NEWBIEish as you are focusing on the one stock not working.
just cut your loss and watch your tone with me. if you cant read and cant see where to cut your loss, then maybe YOU shoudl not be trading.
I have a feeling…you shouldn’t be. Your tone is a tone of a NON-professional.
POT MON and MOS are not working like they should….how many times do i have to tell you all…..if it doesn’t work immediately….CUT IT!!!!!!
how hard is this?
look at all the huge winners i have owned HERE the past two years, then look at my past track record…..you think i EVER let ANY loss ride.
Just move on, if it doesn’t work. KEEP IT SIMPLE STUPID.
You guys are looking wayyyyyyyyyyyyy tooooooooooo mcuh into this. Just realize it is not time yet…..MOVE ON! We will come back later. OR….do what I just did. SELL 1/2 and hold the rest till a new high close. I TOLD YOU WHERE TO CUT YOUR LOSS.
Lesson learned….there is no lesson. it was just too early but HOW MANY TIMES DID I WARN YOU THAT THIS WAS AN EARLY TRADE?
come on guys!
sc99
Nothing to learn from today’s light volume action. It could be stalling before a leg up or down.
and forget boosts from Fast Money…it will show up in the chart. ignore all anything you hear see touch smell or any other sixth sense on CNBC. IGNORE IT ALL.
Just pay attention to our charts!
Thanks MS. I’m just an newbie observer…watching and trying to absorb and learn all I can here (and there’s a LOT to learn here). My time for learning is kind of limited, but I try to study as many of Josh’s charts as I can, both the past ones and the ones that are playing out now. I’ve been kind of watching POT since it’s been a leader that gets a lot of media play. (However, the chart and the CANSLIM principles are my guides, not the media) I believe I read in one of WON’s books that the bull leaders are often the last to go in a bear market. So I’ve been watching to see how POT plays out and how I can learn from that. Thanks again. This site is the BEST.
dang POT! stay off the POT!!
thank you sc…keep it up buddy!
So it didn’t move lower immediately, but shorts rarely do– the final cutoff you suggested was 110– why did you pick 110? That was a huge loss over the short point. I should’ve picked a lower one than 102 but at least I saved the final move. How can you pick a better cutoff?
You can not. If you have to stick to not losing a lot, you must only use the 7-8% cut loss rule by O’Neil in his CANSLIM system. If you can’t take a 10% loss, go ahead and end everything at 7%.
That is the best way. Stay systematic.