Strategy Description: With the VMW gap down on earnings it started to look somewhat over-extended on the daily so I was prepared to play it for a bounce but my preferred strategy was to get short. On the open I was looking for a pop and hold lower to short, but it was a secondary idea and wasn't paying too much attention.
About 10:15 it was pretty clear that it was in a strong downtrend but that it wasn't "flushing out". Was more a consistent trend. At this point you want to look for ways to join the trend with a tight stop as a momentum position, can just start in tiny with a wide stop and add to a winner and trail stop-loss. However the ideal setup is the flags drawn where it makes a new low and risk is really really well defined! Each of these flags should be used to get uncomfortably big; especially if profit has been locked in prior on the down move!
A trade like this it is really important to hold some until the trend ends. In this case there wasn't a signal to cover until around $53.50-$53.70 or $52.50 on the speed up, but the case could be made for covering up around $56 when it broke the downtrend, only if the short was re-established on a new low.
As a note, I think the correct decision around $56 would have been to stop on a reclaim of that prior low of $56.20. The nervousness around times when prices is testing regions where you will be stopped out can be reduced by covering some size into downmoves.
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