One New Short Position For Tuesday’s Stock Market Session

February 25, 2008

I don’t recommend ANY newbie take this trade. Just study this chart pattern and realize this can lead to some big gains. In this market, with the short-term trend being up, newbies just don’t need to be short. For the pro’s, if you go short this, definitely do not make it any more than a few % of your portfolio as it just is not ugly enough. However, any time you reverse a breakout attempt so quick (less than a month), it is very bearish and the odds of this stock going lower are greatly in our favor. Keep it small or don’t keep it at all. It would also be nice to make some money on this stock as a short, after making a 25% gain on it last year.

new short position: TSRA

TSRA is reversing the early February breakout and breaking down below the 50 and 200 day moving average, on very strong volume. this chart is a combination of two of the most bearish setups a good short pattern can make: reversing a breakout on strong volume (usually you want to see higher on the reversal; this was not the case with TSRA today) and breaking down below both key moving averages on strong volume. It is not often you get this type of setup with the stock so close to the highs. However, the stock really isn’t that ugly and it would not surprise me if it did not work based on the stock market’s short-term uptrend (3 out of 4 stocks follow the general market). If BOP was red and not yellow, the RS line was hitting new 2008 lows ahead of price, and if there was more distribution on this selloff I would love to get short a lot more than what I will be doing. More red on the chart = me shorting more; yellow = shorting less. This is a “yellow” (BOP on the bottom of the chart) stock.