Let me be clear. When it comes to pinch plays, to catch the absolute bottom is not the goal, but to buy at a cheap price on an established bottom. Meaning once the pinch occurs I want to see strength, one I see strength in price action that's when I'll buy in. Some times I'll buy in while the stock is still declining, thinking I've found the bottom. This happens rarely, I'm usually days early so patience is and has always been one of my weaknesses. Whenever I think about jumping in the stock i'll think to myself that I should just wait a few more days and I usually do that. As far as how long do I hold these? It depends on price action. Before I enter any trade I have two price targets, one for profits and one for losses. Whichever comes first I'll close out the trade. But I'm in these trades could be one day to a month, it all depends.
1) you never short a stock that has gone too high? 2) in case of bottom fishing , do you buy stock or buy call option?
Good point. There is such a thing as a reverse pinch.. where you short a stock that has been overbought making highs.. I rarely do these though, I have much more success buying low and cheap and having a long bias moreso than a shorting.
Bottom fishing I'll buy stock if its cheap sub $10 and I'll buy options if the stock is expensive and offers liquid options. If no options are listed on the expensive stock I don't enter the trade.
"For it is written, I will destroy the wisdom of the wise, and will bring to nothing the understanding of the prudent. Where is the wise? Where is the scribe? Where is the dispute of this world? Hath not God made foolish the wisdom of this world?" #SaulofTarsus
"People travel to wonder at the height of mountains, at the huge waves of the sea, at the long courses of rivers, at the vast compass of the ocean, at the circular motion of the stars; and they pass by themselves without wondering." #AugustineofHippo
$CMRX - Chimerix I've been long shares @ avg 1.38 since the initial pinch October 30th. I sold the majority of shares at my target of 1.93 (where the Volume Value Area is). Over the years I've learned to keep a portion of shares still on if I don't see any reason/weakness in price action. I still have a small position in here, yet still making greenbacks especially from todays action. I will completely liquidate once I see selling pressure! This might be the trade of the year for me guys!
Exactly my man! That huge volume influx is another great indicator of a reversal and CMRX played like a champ. One of my better trades for sure. My goal is to trade these plays by holding until I see a reason to get out. In the past I would ride the pop up for a for ticks and get out for a few hundred bucks a pop, but managing winners (when it comes to stock) never made me much money. Holding and letting winners ride has worked out brilliantly and I'm going to keep the disciplined plan. I'll be posting more potential set ups soon!