{"id":340,"date":"2009-01-27T21:44:14","date_gmt":"2009-01-28T02:44:14","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=340"},"modified":"2009-01-28T20:28:47","modified_gmt":"2009-01-29T01:28:47","slug":"trading-unusual-weakness","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/trading-unusual-weakness","title":{"rendered":"Trading Unusual Weakness"},"content":{"rendered":"<p><a href=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2009\/01\/usb1.bmp\" title=\"USB\"><\/a><a href=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2009\/01\/aflbreakdown1.bmp\" title=\"AFL Breakdown\"><\/a>Many short term traders get killed trading weak stocks on the short side.\u00a0 What is the root cause?\u00a0 The most common error is they have poor entry prices.\u00a0 We all know that a stock in rapid decline is on the radar of every day trader and hedge fund on the Street.\u00a0 This attention creates spikes that some interpret as a possible reversal.\u00a0 Short term traders must always protect against a possible reversal so they will cover and take a loss even if they believe the stock will trader lower.\u00a0 Let&#8217;s look at a couple of recent examples on how to get involved relatively safely in short positions that offer great potential reward.<\/p>\n<p>On January 21,\u00a0 USB reported earnings and was In Play.\u00a0 Our most recent trainee to go Live said she would watch it for a good <a href=\"http:\/\/www.smbtraining.com\">trading opportunity<\/a> on the Open.\u00a0 As the market opened USB showed weakness.\u00a0 Our young trainee indicated to me it was very weak and I punched it up on my platform.\u00a0 But I was actively trading IBM so I didn&#8217;t enter a trade in USB.\u00a0 During the next minute USB rapidly declines another point.\u00a0 This is a large move for a $15 stock.\u00a0 Now it was truly on my radar!\u00a0 I offerred 1,000 shares at resistance around $14.\u00a0 My offer was not taken and the stock quickly dropped another point.<\/p>\n<p>Many traders would aggressively chase this stock and get short as long as the price was declining.\u00a0 This is not necessary.\u00a0 Once a stock has a powerful down move there is a very good chance (especially in this market) that there will be additional safe entry points before a further decline.\u00a0 So after USB declined to 13 I waited for it to pop back up.\u00a0 It very quickly moved above 14 but could not hold a bid above 14.20. I was able to establish a short position at 14.15.\u00a0 When it dropped below 14 I added to my position expecting a powerful down move through the low.<\/p>\n<p>The stock dropped about 1.5 points in the next few minutes.\u00a0 I never risked more than 10 cents because of the resistance at the 14.20 area and was able to participate in the large down move.\u00a0 This wasn&#8217;t the only way I could have traded USB but it was a very <a href=\"http:\/\/www.smbtraining.com\">safe trade<\/a> that offered a ton of upside.<\/p>\n<p>On January 26, AFL had a sharp down move below 23.\u00a0 It dropped to around 21.25.\u00a0 The discussion in my row was where should we look to get short more.\u00a0 We had been waiting for a couple of days for AFL to trade down sharply as the recent price action indicated it would eventually trade significantly lower.<\/p>\n<p>In this case I actually aggressively hit the bid when my alert was triggered as I had traded the stock during the two previous sessions and understood that the downward pressure through 23 would be significant.\u00a0 But I did cover into the initial sharp down move because it was extremely likely that AFL would offer another great entry point.\u00a0 In fact, I made more money on my second short than I had on the first.<\/p>\n<p>AFL bounced to around 22.\u00a0 It was having trouble holding the bid above 22.10.\u00a0 So Connor and I both established short positions.\u00a0 We were willing to risk ten cents.\u00a0 We had already seen a vicious down move so we knew that there was at least one point of downside if the stock failed to hold above 22.\u00a0\u00a0 Within 15 minutes it traded through the low.<\/p>\n<p>Both of these trades were low risk and offered a ton of upside.\u00a0 We were always in control of our positions and therefore had almost no stress.\u00a0 If you are carefully following the market you can always find low risk high reward entry points for an In Play stock.\u00a0 It just requires being patient.<\/p>\n<p><a href=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2009\/01\/usb1.bmp\" title=\"USB\"><img decoding=\"async\" src=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2009\/01\/usb1.bmp\" alt=\"USB\" \/><\/a><\/p>\n<p><a href=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2009\/01\/aflbreakdown1.bmp\" title=\"AFL Breakdown\"><img loading=\"lazy\" decoding=\"async\" width=\"497\" src=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2009\/01\/aflbreakdown1.bmp\" alt=\"AFL Breakdown\" height=\"335\" style=\"width: 495px; height: 333px\" \/><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Many short term traders get killed trading weak stocks on the short side.\u00a0 What is the root cause?\u00a0 The most common error is they have poor entry prices.\u00a0 We all know that a stock in rapid decline is on the radar of every day trader and hedge fund on the Street.\u00a0 This attention creates spikes that some interpret as a &#8230; <a href=\"https:\/\/www.smbtraining.com\/blog\/trading-unusual-weakness\" class=\"more-link\">Read More<\/a><\/p>\n","protected":false},"author":143,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,15],"tags":[226,225,223,222,18,224],"class_list":["post-340","post","type-post","status-publish","format-standard","hentry","category-steven_spencer_steves_blogs","category-trading_theory","tag-afl","tag-ibm","tag-patience","tag-shorting","tag-smb-capital","tag-usb","no-post-thumbnail"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.1.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Trading Unusual Weakness | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/trading-unusual-weakness\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Trading Unusual Weakness | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Many short term traders get killed trading weak stocks on the short side.\u00a0 What is the root cause?\u00a0 The most common error is they have poor entry prices.\u00a0 We all know that a stock in rapid decline is on the radar of every day trader and hedge fund on the Street.\u00a0 This attention creates spikes that some interpret as a ... 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