We traded $yrcw for a nice profit today and I was going to go over the mechanics of the trade. Parabolic shorts have always been one of our “go to” setups. Here is another blog from the past explaining the setup as well.. check it out if you haven’t already. This is one of the setups that you will learn in depth in the trading bootcamp that starts up in one week, but here is a teaser on the setup.
When you see a stock that has run up multiple days in a row you automatically start thinking about the parabolic short play. The risk to reward on these parabolic stocks is no longer on the long side when they reach overbought conditions and have had a multi-day run up. So logically, the stock can’t go straight up forever right? Eventually it is going to need to rest or fall back. What I am looking for on parabolic short plays.. is a gap up and overbought conditions.. when you see weakness in the stock that is your cue to short it. We had $yrcw on our watchlist last night as a potential parabolic short because it had run straight up on earnings and was overbought. What we got this morning was exactly what we wanted, a nice gap up. Once we saw weakness and saw the stock moving red we shorted it at an average of 15.43.. as you can see on the intraday chart the stock quickly flushed on the red move and made a steady move down all day long. We banked $990 dollars on this daytrade today!