Trading Tactics

Discussion in 'Strategy Development' started by da-net, Jul 30, 2005.

  1. da-net

    da-net

    I recieved this email from a free subscription service and thought it might prove interesting on trading tactics to all.


    "Anatomy of a Short Squeeze, or How to Win Ball Games…

    On Wednesday afternoon, the Red Zone VIPinstituted a short squeeze on an old favorite, Altair b(ALTI:NASDAQ). I had picked up a rumor about an upgrade on this stock. After I brought up the chart, two things stood out.

    The first was that the stock had just triggered the Tri-Direction Indicator buy signal. The second was that the stock had gone sideways for the past three months a just under US$3 a share.

    The Red Zonecalls this type of sideways stock chart a “loaded gun”. That’s because it is still, motionless and full of potential energy. All it needs is a trigger – and kabam! It’s off.

    I had also noticed that the percentage of shares short had been high and was growing. From 2.53 million shares to 4.38 million shares and the percentage of shares short grew to 8.2% of the float.

    Incidentally, part of the rumor had it that the market makers wanted to blow out the shorts and cause a “short squeeze” – a process that drives up the share price until the shorts can no longer take the pain and buy shares to cover the ones they borrowed.

    The trigger was pulled when the Red Zone’s VIPTri-Directional Indicator signaled a buy and I put out a recommendation to my best people to buy ALTI at $2.93. This instantly put 120,000 shares in play. The market makers followed with 1,000,000. The shorts got squeezed and some portion of them decided to cut their loses. The stock went from $2.93 to $3.35 in two hours.

    Four and a half million shares were traded yesterday compared to the average daily volume of 1.4 million. We sold this morning at $3.17 for a quick and easy 8.2% gain after it was evident that there would be no follow through.

    It was not a home run by any stretch, but it’s a fast profit and a nice example of how to keep going forward despite the lack of clear opportunities. If we were talking baseball it would be called manufacturing a run.

    It’s how you win ball games.

    Enjoy your weekend,

    Christian DeHaemer

    Publisher, Red Zone Network"