Our play last week in shorting ARNA is an example of a parabolic short. What is parabolic? In terms of a stock Parabolic means the last big upthrust in a stock in an extreme uptrend. There is an emotional frenzy or even panic buying as a stock goes vertical. During this time there is very little selling going on creating a vacuum of buyers if anybody wants to buy shares they will have to keep bidding up the shares higher and higher till a seller emerges ready to relinquish there shares all of the sudden you get all the retail traders start flying into the stock as they fear getting left behind. They read all the posts on twitter, chatrooms, message boards…it looks like everyone is making this huge amount of money as the stock is rising and they convince themselves or rationalize it to themselves that this stock still has more upside regardless if there is a setup or not. When those rookies pile in that causes the parabolic move and can signal the top for the stock. Thats when we put it on our radar to short it.
Our first short was at 3.28 and we covered at 3.05 and 3.1
Our 2nd short was at 3.03 and we coverd in the low 2.8s
3rd short was at 3.12 covering in the 2.92 range
4th short 3.03 and i covered 3.05
I give myself an B+ on the trade. I was a little bit skittish on the entries and could have been more aggressive…but I just dont short that often at least not in the chatroom via alerts. We really could have nailed this stock a few more times especially on pops insted of waiting for the fade but I was being a tad conservative on them as Im still practicing a lot of my angles on shorts and need to get better on certain stuff.
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