2 Shorting Trade Setups You Should be Looking For, But better Hope Your Broker Has Shares!
Oct 7, 2008 Day Trading
I came accross two great shorting opportunities today that i tried to capitalize on yet theres nothing more annoying when you find a good opportunity, set up the order, click the short button, and you get a pop-up window that says “Not on the Short List” ……. ugh! I wasn’t able to get shares on either of these.
But in any regards, these are two examples of shorting setups that have a high probability of working in your favor and you should be scanning the markets for more opportunities like these as they arise. Note both of these are day trading stratedgies.
Day Trading Example #1
First example is called “Fading the gap” using the 5 minute intraday chart. This strat only works on stocks early in the morning as you are playing the morning gap. During the Pre-market you scan for the largest % movers that are also liquid stocks so that you can hopefully get some shares. Early in the AM I noticed AMD gapping up 22% which presents both long and short fades. But most gap ups lead to profit taking. I like to call them “Gap to Crap” trades so we’re looking to go short. I use the 15 minute rule with 5 minute candles meaning you don’t execute a trade until after the first 3 candles have been formed which create highs and lows on those 3 candles. A long position is triggered on the breakout above the high of those 3 candles, a short trade is triggered on a breakdown of the low of those 3 candles. You can also buy or short earlier in the pattern trading the pennant/trianlge formation breakdown which is what i tried to do today.
So looking at the 5 min chart of AMD, in the first 3 candles it created a high of 5.60 and a low of 5.10. So you would look to go long on a breakout above 5.60 and go short on a breakdown of 5.10. As sentiment was weak on AMD and traded near the lower boundary of the 15 minutes of trading and then broke down the inner pennant. I tried to short some shares near 5.20 but wasn’t able to borrow any. Price then broke down the 15 minute pattern support and got slammed in the next 10 minutes dropping as low as 4.62 or around 12% presenting a great short term day trading opportunity. So keep an eye on future opportunities like this.
Day Trading Example #2
Second day trading example is on UAUA which is shorting multi-day support breakdowns. Looking at multi-day charts is a more reliable way to strong stronger patterns than looking at a 1 day chart of a stock. You will catch higher % moves trading a multi-day intraday chart.
Looking at UAUA’s 2 day 5 min chart price bottomed out 3 times around 6.30 creating a strong support level, yet if this mark is broken it creates a strong shorting opportunity. I tried shorting this stock near 6.25 on the breakdown yet once again my broker didn’t have any shares currently. UAUA then proceded to fall all the way to $5 during todays session presenting a huge day trading opportunity. So as the short selling ban is coming up soon there should be more of these opportunities like this coming up. Keep your eyes open and look for multi-day support levels that could have potential breakdowns.
Tags: AMD, Day Trading, Technical Analysis, UAUA
