Strategy Description: This kind of trade can be applied to a multiple of stocks but wanted to hone in particularly on the lower float small cap type of trade because that's where the biggest edge is found.
As I have noted multiple times there are a couple of reasons to consider shorting float rotation on day 1:
(1) Enormous move.
(2) Below vwap post 10-11ish.
(3) Float bigger than usual.
(4) History of failing moves. Note that have to be careful of this because the one where it runs it likely runs far.
So the only criteria CERE didn't fulfil was having a small float. However that becomes a non issue the moment it is below vwap because there is a clear and easy stop above vwap.
The setup:
- Establish a bias. In this case my thought process was that everyone was scared to short it because of how AQXP behaved recently so it probably just fulfilled recent patterns of failing. Remember that a long float rotation setup occurs if holding above vwap post 10-11ish, so that would have been the trigger for a change in bias.
- After the morning push failed completely the overhang was establish, and risk was defined, so looking for shorting opportunities from there.
- Important to realise that there was no rush to get position on. Had until at least (9:45-10:15). I started in a little early that's why I'm noting this.
- Start into the morning parabolic, but NO SIZE until overhang established.
- Add on the $4 stuff.
- Max size once below $3.80. Risk now over/under $4.
- Cover half into downmove and hold rest for most/all of day.
- Look for opportunities to reshort during the day. All pops should be sold into and should close near the low of day.
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