Short Squeezes and Market Dynamics

Discussion in 'Trading' started by David nassar, Feb 8, 2002.

  1. Today ends an exciting week in the market. Nasdaq bust a key price level and moving average level of 1800. The SOX (Philadelphia Semis) look like a top heavy head and shoulders weakening at the knees, and the BTK (Biotech’s) look t=like thy have had enough bullets fired at them since the beginning of the year stabilizing for a trend reversal to the upside.

    Today staged a late day rally on a short squeeze that you could see coming based on the market action this week as well as the internals. All in all for the week, I think we see a weak Nasdaq next week, an even weaker SOX and a strong Biotech. As always, trade what you see not what you think, but always have a bias based on objective analysis before each trading day. This is my closing view of the week and outlook at this point for next week.

    We have received tremendous response to the posting of my order book and trades done, therefore I will continue to post trading results as time permits. Today was a bit choppy up until the close, so activity was light yet marginally profitable. The attachment will show some activity in AMGN once again for some scalping activity. Next week should be very active if the market trends continue and we will continue to post. Next week will although be short given the OTE. We will be leaving Thursday so trading will be only Monday through Wednesday. Look for us (RealTick, TeraNova, and MarketWise) at the show and have a great weekend. Here are few charts to feed you market animals till then! lol
     
  2. I should clarify that even though we held above 1800 at 1818 for the COMPX, we did in fact break the 1800 level sharply today to 1778. The fact that we had an afternoon rally to close above 1800 smells more like a short squeeze versus true stabilization. Also, please forgive my type-o in the last post. I'm going fast, heading out the door for a couple beers! :D
     
  3. Light day. Net profit $675:)
     
  4. mike s

    mike s

    David,

    Are you adding to a losing position? Or should I say, averaging in?

    bot 1k @.27, bot 1k @.32 for avg. of .295
    then three minutes later it's against you and you double up with 2k shares @.20 for avg. of 4k shares @.2475.

    Sold shortly thereafter for profit.

    Also at the end of the day it looks like an "average in" to a short
    with a loss but I'm not sure because that 57.25 buy looks like a long with no sell.

    Anyway, just curious. I've used a quick averaging in move w/ a tight stop on scalping that has worked but I've also had it get away from me and really hurt too. I'm thinking I don't want to do that any more. :eek:

    mike s
     
  5. Mike S,

    I will average into trades, but not for the sake of averaging down or up relative to profitability. I trade size (usually between 5 and 50 thousand shares). I will trade into a position I want as long as the issue is within my trading range that I am willing to buy or sell. In this case, this was just a scalp where I added to my position while it traded in my selling range. Also, the long cover showed as a short sell since I did not unclick the short sell box on my RealTick. This will record to the order book as a short, but clear properly, which is what happened. This was not a huge day, but I posted it to indicate that while trading size and keeping your stops tight, you can make money even with a 50K to 100K account. Remember, don't average in to lower or raise cost basis (long/short). Average in if the issue is within your buying and selling range and you want to trade size. P&L is irrelevant to trading while in the trade. Only the levels and data are important, follow these objective data points and let the P&L take care of itself. This is the basis of tight stops and rules based trading regarding day trading and scalping. Trade Wise my friend and visit us at www.marketwise.com for a free trail to our WiseGuide and BlackBox Forecasts. Perhaps we can help.

    Warmest Regards,

    David S. Nassar
     
  6. Magna

    Magna Administrator

    David,

    Please expound upon this, as I often get sidetracked "checking up" on my P&L. BTW, I appreciate your posts here at Elite. I realize it isn't altruistic and you're promoting your service at every opportunity, but I've got no problem with that as long as you keep contributing.
     
  7. P&L is the doorway to emotions. It creates exuberance on high’s and fear on lows and takes away your objectivity.. remember, when you open a trade you know precisely where your exit and entry points are. P&L can hinder your conviction to stay with the winners, and keep you into losers with bad strategies like averaging down. If one can stay objective and use the levels, technicals, and original stops set for high reward/low risk trades, then the trades will take care of themselves as will the P&L. If the trade made is poorly set-up with a high risk/reward relationship, then not only should it not have been made, but the stops are harder to trust and follow, therefore making the P&L the beacon (as opposed to the volume and price action which most TA is based on) becomes the focus and this is a mistake many make.