I'm starting a new journal that focuses solely on pinch plays. What is a pinch play? A pinch is another term for short squeeze. I find stocks or any instrument that has been beaten to death for the last few weeks/months and find an opportune price to scoop some shares or options (if available) at low prices and ride the short squeeze up. Pinches come in all shapes and sizes and also they are fractal. They can occur on monthly/weekly/daily/and intraday charts. This is considered a "technical" set up and I will provide details in following posts and throughout the journal. I have been trading these set-ups for almost a decade now with 77% hit rate (which means nothing) but more importantly with net net positive.
While I do not consider myself a technician, when I began my journey trading stocks it was the only appealing path, the other being fundamentals which was more of a buy/hold type of way to invest, so technical analysis it was. Since then I've become more quantitative and I use charts more of a visual tool, but for my pinch plays I use various indicators to base my trades off of. Heres an example of a pinch. Firstly I use the Price Percentage Oscillator, ADX (+DI/-DI) and Full Stochastics indicators on my chart (stockcharts.com) laid on top of each other in that order, which is important. Visually I'll look at the PPO and ADX line drift towards each other and become very close. At that point in time I'll look for my entry. I enter these trades with a few criteria which I'll lay out throughout this thread. I also use the Fast/Full Stochastic indicator OVERLAYED on the PPO for entry. I'll explain more in depth later. Basically the PPO and ADX will converge until they are so close that they will "pinch" and price will pop up and you'll see those two indicators drift away from each other as in the $SIX example I posted. $SIX
Does anyone know how to post images in the post so its already visible for others? Instead of "uploading a file" and having people click the pic to view it bigger?
click on the image. then drag it to this ET edit space. then release the click button. at times, it may not work. so on the edit space, price ENTER few times to create empty space. then click & drag image to that empty space. if still cannot work, then hit the UPLOAD button.
don't quite like the term short squeeze. terms like continuation up / down signal reversal to go up / down signal counter trend trading ( a big NO NO ) sounds better.
I agree but its all semantics. Its all encompassing how price action reacts to certain market conditions. I call this set-up the "pinch" set up because when the PPO and ADX converge it literally looks like your index finger and thumb forming a pinch. I have several tickers for this week that I will be posting shortly!
Nice visual trick, there! Looking forward to seeing you play with this stuff (and hoping to learn something, as always.)