Short Selling Stocks: Plays Galore Limited By Absurd Pattern Day Trading Rule aka SEC Reign Of Terror
Posted by timothysykes on Mon 31st of Mar, 2008 06:13:48 PM
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As I posted early this morning, there were lots of potential shorts today, but I had to be extra-choosy due to the SEC’s reign of terror over accounts under $25k (explanation down below).
Awoke early and reserves shares of my favs—placing my sell limit orders waaay high, intent on lowering them if and when any became good plays:
-300 ASTI @16.99 LMT
-300 GU @16.99 LMT
-1000 BPAX @5.99 LMT
-1000 REED @4.99 LMT
-1000 QBIK @3.99 LMT
Didn’t even need to reserve any COT, it was listed as easy to borrow. But my top pick was REED, and I was hoping—somewhat naively—to get a morning spike to short into…no such luck. It went down quickly, bounced, down again, blah whatever, volume for the day was 60k, spread between bid and ask was 20-40 cents, no thanks. Next!
BPAX—no morning spike there either—disappointing. Had the chance to short my 1,000 shares into a quickly disappearing block at $4.39, but I hate shorting morning droppers, too high risk of reversal, so I hesitated and it passed me by, on its way to $4.10-ish. Missed out on $200 profit, but if it’d held $4.39, it could’ve easily spiked, risk of $200-$400 loss, not a good risk-reward. As evidenced by its surprising afternoon comeback all the way to unchanged—this is not a typical hype play. Next!
Noticed my ASTI order to short 300 ASTI had surprisngly executed at $16.99, the stock was up $1.70 on the day, daaaamn, not a high enough limit order, my mistake, actually a pretty good entry price. 10 minutes later, the stock proved unworthy of holding such daily gains and I covered at $16.69, poor exit, but a nice mistaken $80 profit. Nowhere near close to being a pattern I’d ever play, had an afternoon fade, but also a late spike—shorts couldn’t take it negative, nice higher highs on this one, too risky to short. Next!
Some ANALyst ruined GU’s spike, downgrading it due to its runup. Coulda woulda shoulda shorted into the morning drop, but again, not my ideal pattern, only missed out on $200 profits. Sad—these ANALysts are right about 30% of the time, why are they even allowed to publish? They should be relegated to posting on the Yahoo! message boards, that’s it. Piper ANALyst Charles J. Fishman, I’m talking to you. Next!
ERHE is still too low to short and thanks to Friday’s drop QBIK didn’t have much downside. WH just keeps going, like it’s a real company or something…HYBR shows nice strength, but I’m getting reports from dozens of sources about their spamming, not since SOIGF have I heard of a company being pumped so hard…tough to go long into such fraud.
After ridiculing some guy who got excited about COT breaking $3.75—$3.70 turned out to be the key level after which it really cracked, down to $3.30, maybe that guy should ridicule me!—I watched it all afternoon and when it cracked perfect sideways price action at $3.50, I excitedly/stupidly shorted 1,000 shares at $3.48…gotta learn to be more patient as it held right around there into the close…a bearish chart to be sure, but still green on the day, signal potential morning spike, even if I am rather confident in this short down to $3.25-$3.30, then the question is can it crack 2-day support there and reward me down to $3…easy to borrow shares, small enough current position and overwhelmingly bearish long-term chart means I might add to my position on any strength…
VSE, USBE and YTBLA also all had morning drops, meaning I’d only look to short into their weak closes—not that I could even short YTBLA since I found no shares. Out of these three, YTBLA was the only one to rebound—probly as a result of its hard-to-borrow shares (meaning shorts couldn’t pressure it). VSE and USBE both closed near their lows—if I wasn’t limited in my trading by the absurd pattern day trader rule, I’d probly have shorted them both into the market close. Both right under 5-day support, clear paths paved for 50 cent + drops, kills me I’m not involved!
So let me just say, damn you SEC bastards, I truly hope you rot in hell. Worthy trading opportunities are already difficult enough to come by without your anti-American restrictions. Maybe you should worry more about the “professional traders” who routinely exercise 50-100x leverage and whose actions could easily bring about the destruction of our economy.
But no, you gotta restrict the little guys. If you’re really that concerned with small investors burning through their accounts, you could help promote my blog…it’d reduce the number of naïve trader-wannabes who think they can trade profitably every day and I promise not to post any more mean pictures like that one…well maybe less of those kind.
Now you can Twitter any questions/comments to TIMhelp and obviously you can follow TIM on twitter too!
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TIM Alerts
View All| Date | Stock | Position | Ideal Exit | % Gain |
|---|---|---|---|---|
| Nov 24 | KVHI | Short | $3.70 | 18% |
| Nov 20 | STSX | Short | $3.10 | 11% |
| Nov 18 | PERY | Short | $3.75 | 25% |
| Nov 11 | IIJI | Short | $2.80 | 5% |
| Nov 6 | CVI | Short | $4 | 15% |
| Nov 5 | MECA | Short | $1.95 | 51% |
| Nov 4 | CVI | Short | $4.81 | 4% |
| Nov 3 | NAK | Short | $3.20 | 5% |
| Oct 29 | EVC | Short | $2 | 26% |
| Oct 28 | HSNI | Short | $6.80 | 7% |
| Oct 28 | HSNI | Short | $5.75 | 4% |
November: 9 alerts, 15% avg gain
October: 11 alerts, 14% avg gain
TIM has an annualized Sharpe of 3 in its 5 months of trading.
Tim, I was asking about your input on REED because I was contemplating shorting it but I was tied up with other positions that tied up my capital.
How much money did you lose today Mr. Sykes?
Brendan, he made money today I think.
up about $40 on the day, not worthy of a timometer
I lost some pocket change….
Way oversold on the Walmart news - I wouldn’t short this - it’s going back home
Your site is fun to read - I laughed at the cake with 25 on it- but I’m long on COT and for good reason.
Look at the charts guys
How are we going to play LUNA?
anyone have thoughts on LEH?
Neil, here’s a good commentary on Lehman, http://muffmarkets.com/hbs05/2.....-with-erin
down since that article. News out tonight. I read it as serious dilution but curious about what other people think.
Regarding COT. I think near term it could pull back some before marching on to $5.45, so Tim and Brendan are correct. Just playing on different teams….
Great Blogging Tim, keep up the good work. I enjoy the chart scans, usually I just take them and put them on my 1 minute charts waiting for a breakout or breakdown to short on. I tend to play higher volume stocks for fear of getting stuck in the lower volume ones, however our strategies to cross because I played quite a few of the ones you’re watching … People will learn and learn what to look for in a chart.. for a lot of people this is a very hard concept - but the way you’re show and telling it … it simplifies things
Timmy…your short might have been to soon! COT
“Cott Announces New $250 Million Asset-Based Lending Credit Facility”
http://money.cnn.com/news/news.....382243.htm
Think there will be a STRONG morning spick and it will stay there. Let me know if I am reading this wrong.
The above is a typo…should be SPIKE> Sorry about that.
can’t predict overnight news, now i just cut my losses quickly. next!
Yes Tim, I stand corrected on “whites of their eyes” which I confused with “the shot heard around the world” but it seems a common mistake. I found this in a news article :
“January 6, 2006
Thank God our current Senate Democrats weren’t at Lexington and Concord! They would have run the other way instead of waiting to see the “whites of their eyes” as the lobster coats approached.
If the patriots had held their powder at Lexington and Concord, this nation might still be under a monarchy. (Well, in a way we do still have King George in power, but that’s another story.)”
Why did REED go from $2 to $4+? Anyone?
mike do some research on this site, all my biggest gains come from these kind of crappy stock runups…reasons don’t matter
Thanks for your reply.
Reasons matter to you if it’s earnings though, right?
If reasons don’t matter at all then shouldn’t it just be a systematic strategy of shorting any micro cap stock that exponentially gained and then experiences its first down close?
I”d rather short REED now if it ran up on say a Dan Gartman newsletter pick then if it ran up on a signed new contract.
Anyone in tma over night looks like it will be up huge tom. Any thoughts
Could have been something as simple as the new VP announcement bringing some visibility to the stock and a bunch of brand-familiar investors buying into a stock they knew nothing about (hey man, have you tried their cherry cola? far out!) Disclosure: I have never tasted a REED product and don’t even know if they make cheery cola, but neither do most people that bought into the hype.
I’m not a trader (maybe a trader-wannabe, as Tim so eloquently put), but I have to imagine in this business, as opposed to value investing, or investing on base knowledge, you have to find a line between doing the right amount of research, and taking a chance within the window available. I found REED on a chance and did about a half hour of research before I considered moving on it..
Anyway, enough about this, back to my total ignorance of how to trade- turns out TMA made the announcement tonight that I expected last thursday (they managed to gather up the required $1.35B). It’s around $1.22 right now, and I expect it to shoot up to $2 (or considerably more) before “reason returns”. What is the best way to play this? Do I put a pre-market order in for some shares and set a trailing stop (I can’t watch it all day), or will my pre-market order come in much higher then the current price, and seriously reduce my profit, or even potentially cause a loss? WWTD?
Damn I write too slow! I missed two mikes and a dan by the time I hit the post button!!
I got turned onto this guy after he sold me on GS at 151. Ive made back all my losses!
Yes ….20 sessions $69,150.19 profits 74 Wins 7 losses 2 Break even go to http://www.ttthedgefund.blogspot.com
Neil, I have an opinion on LEH.
They want to sue something for $250 mn. The sued company claims that the documents are all fake. I dont really care what the other company is but trying to get $250 mn seems absurd to me. I think a company that has nothing to lose will only do so. So my opinion is that there is a possibility of them experiencing something similar to bear sterns.
But as Tim always says, this is gambling and could just not happen as well.
would you short COT today?
TTThedgefund is the hottest blog on the web. This guy was born for these weird times. They killed with live timestamped trades…finally real proof from a really smart guy who understands the day to day of this crazy market. Im totally back from disaster the last three months. TTThedgefund will get you the money you need today…live.
How do you reserve hard to borrow shares?