Strategy Description: Very very similar to the BLUE trade on the prior day. When the (negative) breaking news comes out on the stock you usually want to be seeing how the price behaves directly after the news. Sometimes it can be setting up for a decent bounce, other times it can be setting up for continuation to the downside.
Firstly it is VERY important not to jump in too quickly. For the continuation pattern you want to see evidence that it's beginning the reject from higher prices before beginning to short. As a guide, you would expect the next leg lower to begin in about half an hour from the initial spike, and therefore begin initiating your position at least 10 minutes after the initial spike. Patience will allow for better defined risk.
As it begins to reject start into position, only shorting into strength (to ensure good entry price). As it begin to grind a little lower offer out to get shorter into pops, this time risk should be pretty well defined. Then short a final little bit as it cracks and makes a new low. Cover accordingly into the wash. If it reclaims that low that's most likely your signal to either cover down or stop out.
No comments:
Post a Comment