Threshold pharmaceuticals has certainly tested the threshold of my pain levels recently. 🙂 However in the midst of losing money on this short today, I actually learned alot about shorting momentum stocks from my mistakes. So for all you daytraders out there, here is a tip for shorting intraday runners. The number one rule about trading any stock is to wait and make sure you have a setup. Well the exact same principle applies when shorting momentum stocks, I just failed to do that today. Instead, I blindly went in $THLD and got my face ripped for 40 cents. But, the important thing is that I learned from this mistake and am now going to share it with you.. so here is what I found:
When shorting a momentum stock, I have found that the best short opportunities come late day around 1 pm. Just like we look for intraday breaks and end of day runners for longs around this time, we can also look for parabolic shorts on the intraday charts. When you find a “holy grail” intraday chart, meaning the stock has established an uptrend all day, then you wait for the trend to break towards the late afternoon and thats where you hammer the short. The most common short that I have observed to be working is the intraday break of the 20dma after the stock has been riding it up all day. Just an observation of the past few days, that I thought I would share. Pretty simple and basic observation, but makes for big money and I like that combination! Heres an example of my mistake today, and where I should have actually taken the short instead.
I shorted the stock here in the morning 5.3 or so.. my initial thought process was: the stock closed really weak yesterday and now should move green to red after this morning bounce.. well i was stubborn and didn’t wait for the stock to move red and instead shorted early thinking I could catch a few extra gains. Wrong.. ended up stopping out for 40 cent loss..
The way this stock should have actually been traded: Short the stock if indeed it had broken that 5 level and gone red or wait for 1pm and short when the 20dma trend broke right here at 5.93 and taken the 30 cents out of the short..