• DUST - Jan 21 201520150121
  • FOE - Jan 14 201520150114
  • GMCR - Dec 01 201420141201
  • ILMN - Dec 02 201420141202
  • NFLX - Jan 12 201520150112
  • NVO - Jan 06 201520150106

Short Setups

Stocks in a bearish pattern formation that are poised to break-down and provide an objective short entry. Also included in this category are stocks that may have already triggered a short entry but still offer an objective entry or add-on to the position at or near current levels such as a bounce back to a key resistance level.

Jan 212015
DUST 1 minute pre-market Jan 21st

DUST 1 minute pre-market Jan 21st

The DUST (3x short gold miners) quick bounce/hedging trade idea posted yesterday is currently indicated to gap slightly below yesterday's LOD (low of day). With gold trading higher overnight (largely as a result of the $USD trading lower), the miners (GDX) have been indicated to gap higher throughout the pre-market session although those gains have started to fade since about 8:30am ET.

With DUST currently trading right around the suggested stop (a few cents below yesterday's LOD of 11.21), my plan is to pull my stop and re-enter it after the first 30 - 60 minutes of trading. The shaded areas on the 1-minute chart below show the after-hours & pre-market trades in DUST. As always, employ stop criteria that are commensurate with your own trading style & risk tolerance.

Jan 202015
DUST 15 min Jan 20th

DUST 15 min Jan 20th

DUST could provide a quick trade for those interested in attempting to profit from or hedge against a pullback in the miners. DUST is the 3x leveraged short (bearish) ETF for the gold mining sector and should the miners pullback over the next few days as I suspect, DUST could either provide for a quick, leveraged pure-play on a pullback in the miners or used as a hedge against GDX and/or individual mining positions.

Of course, one could short GDX directly and not worry about the decay as the 3x leveraged DUST is best used only for very short-term trades lasting a few days or less. As stated earlier today, my preferred pullback target for GDX is the 22 area. My current preferred target on DUST is 13.75 with a sell limit about 20 cents below that, as I suspect GDX(DUST) may reverse just above(below) support(resistance), and a stop set just a few cents below today's LOD of 11.21. With DUST currently trading around 11.80, that gives this trade a fairly attractive R/R of about 4.3:1.

Jan 122015
NFLX daily Jan 12th

NFLX daily Jan 12th

NFLX (Netflix, Inc) will trigger a short entry on an break below 310.00. Netflix recently broke below a two-year uptrend line, which terminated with a bearish rising wedge pattern, in late 2014 and is currently flirting with a key horizontal support shelf. T3 (215) is the current final & preferred swing target at this time.

click here to view the live, annotated daily chart of NFLX

Jan 062015
GMCR daily Jan 6th

GMCR daily Jan 6th

The GMCR (Keurig Green Mountain Inc) short trade has hit the first target, T1 at 127.95, for an 8.5% gain in just under 5 weeks. T3, the final target at 90.55 is my current preferred swing target on this trade as of now but as always, consider booking full or partial profits and/or lowering stops to protect profits if holding out for T2 or T3.

Due to the considerable downside left, assuming this trade reaches the final target, GMCR will remain both an Active Trade as well as a Short Setup as the stock still offers an objective entry. However, price targets on short trades are set just above support level where a reaction (bounce or consolidation) are likely. Therefore, it would be prudent to wait for GMCR to break below the 124 level before re-shorting (if covering here), initiating (a new short position) or adding to an existing short position.

click here to view the live, annotated chart of GMCR

Jan 062015
NVO daily Jan 6th

NVO daily Jan 6th

NVO (Novo Nordisk, A/S) offers an objective short entry on this break below the 42ish support level, which also follows the recent breakdown & successful backtest of this large bearish rising wedge pattern (which was defined by the primary uptrend line generated off of the Oct 2011 lows). A more conservative entry would be to wait for either a large move below or a solid close below the 42ish support level.

Suggested stops based on a 3:1 or better R/R to one's preferred price target. e.g: Assuming an entry around the current price of 41.95, those targeting the final target, T3 at 35.80 might consider a stop around the 44 level (41.95 entry - 35.80 target = $6.15 profit; $6.15 / 3 = $2.05; entry price of 41.95 + 2.05 = 44.00 stop loss).

click here to view the live chart of NVO

Dec 022014

ILMN (Illumina Inc) offers an aggressive short entry while near the top of this large rising wedge pattern with a more conservative/conventional entry or add-on to come on a break below the bottom of the wedge. Suggested stops based on a 3:1 R/R to one's preferred target(s). Barring a large gap down, ILMN will be added as an Active Long Trade at the open tomorrow.

The large rising wedge pattern on the daily (first) chart below can also been viewed on the weekly (second) chart along with the percentage drops that followed all other similar weekly divergent tops over the last decade (39-68% corrections). Two of those three previous corrections bear markets in ILMN occurred while the US broad markets were solidly entrenched in bull markets (2006 & 2011), highlighting the fact that money can be made shorting the right stocks at the right time in a bull market. My plan for this trade is to take a fractional position here near the top of the pattern, adding to the position if & when prices break below the bottom of the wedge although I may also decide to cover my position on the initial tag of the uptrend line (then shorting a full position on a break below the pattern).

Of course the markets are dynamic and as such, so are my trading plans. T2 at 136.10, which is set just above the 134 horizontal, is the current preferred swing target at this time. Should prices ultimately make a solid break below the 127 support level (not drawn on this chart), especially if the broad market were to be in a confirmed downtrend at the time, the chances would be good for a back-fill of the thin zone that runs from 134 down to the 86 level.