Strategy Description: Consider a float rotation stock with a large gap up, positive news and after initial move down beginning the annoying next wave up; where if it gets above vwap you know it's going to at least test the highs.
The stocks essentially trade to screw with the masses. Having a stop-loss too tight against the high and you are going to get stopped out. Shorting above vwap without a solid game plan is a recipe for disaster.
This bring to the shorting opportunity as it comes into the high of day after the initial flush down. You want to be scaling into the short with a stop-loss about 20% of current range above the high. E.G. In this case it had moved just over $1.50 so you want to be stopping somewhere in the 12.70s (HOD 12.44 and 12.50 sig level from premarket). So you would put on max size in the high 12.5x zone.
This trade initiates as a scalp against the dominant trend. You want to be taking profit and downsizing pretty quickly! While initiating as a scalp it can turn into a reversal trade. So after taking off half reconsider adding it back on appropriate price action. Especially if it gets below vwap (which in this case it didn't).
This setup is the epitomy of picking appropriate prices to initiate a trade, despite being well against the predominant trend for the day it still yielded around 2-5R. Really good reinforcement of how important it is to pick prices.
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