The Dangers Of Shorting Hot Oil Stocks With Absurd SEC Rules, A Lack Of Discipline & A Tiny Account
Posted by timothysykes on Wed 21st of May, 2008 04:34:42 PM
Tags:
Sponsor Offer:
That title is just about the worst combo there is and yet I went full steam ahead, shorting 1,000 FPP five minutes after the market open into a spike I thought to be ill-fated. Nearly right away when I was down 20 cents on my position, I knew I’d screwed up. Despite my warning everyone about the dangers of shorting these rocketships before they go red and the fact that I made the exact same mistake just two days ago, I even refused to take a $150 profit, instead wanting more, almost inevitably getting squeezed for a $600 loss.
I guess it’s true what they say, you can’t t each a greedy Jew new tricks.
I explained my rational for breaking the very rulesI created to protect myself the other day—not that its much of an excuse—and today was no different, except FPP was double the price and I got squeezed for double, 50 cent/share as opposed to 25, too. Fitting, right? Again, I was right about the morning pullback after the spike, it just happened $1 higher than my entry!
(Soooooooo much better to go long these things, but here’s another new twist to the problems caused by the SEC’s absurd pattern day trading rule—since you can’t go in and out, in and out, in and out of any 1 stock over one five day period, my specialty is going short and I don’t think these runs can last another 5 days—if I buy for $1-2/share gains, which is all I’d be comfortable doing, I probly wouldn’t be able to short them when they crash. And due to my skillset, I’ll be very comfortable holding these suckers for $3-5/share on the downside. So, forget about me whining about not being able to trade, now I gotta whine about being forced to play these stocks only from the short side!)
But today is just a typical amateur mistake created by me wanting to get back to even for the month (horribly typical trader emotion, now down 4% booo hooo you little bitch), getting too comfortable shorting this supernova pattern (over the past few months, each time shorting after this many days would’ve worked, of course this is why commodity plays are different!!!) and the fact that the spammers like KYUS, FOUR and FORC aren’t collapsing like normal so there’s really nothing else to play.
And that’s the key to avoid making similar mistakes—come in with no expectations. I built it up in my tiny brain that these commodity plays will fall apart and I have to profit from it. Blog post after blog post, I’ve been saying, watch these stocks, today they could/should fall apart when in fact they’ve showed no signs of true weakness whatsoever. It’s a testament to my taking quick losses that after being so wrong so many times in a row now, I’m only down $1,500 or so off my highs.
So, do me a favor, if you must try to profit from these potential quick morning drops—which I don’t recommend—it’s far far far far far better to short a strong stock’s that’s gone slightly negative on the day as you would’ve made $2/share on BWEN, $1/share on HYBR and 50 cents/share on KUN, MMGW and CPSL before some of them bouncing.
Now you can Twitter any questions/comments to TIMhelp and obviously you can follow TIM on twitter too!
Related Reading
80 Responses
Other Websites Referencing This Post
- Short Selling Hyped Up Oil Stocks: Fieldpoint Petroleum Corp. (FPP) Et Al | TIM - Timothy Sykes
- Why The Pattern Day Trader Rule Proves The SEC Rivals Osama Bin Laden In Terrorism | TIM - Timothy Sykes
Leave a Reply
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
AOG CNR BPG not for the faint of heart but are in play oil/gas stocks under a buck. Long or short,choose your poison.
ROSE GPOR SSN TGC may be among this sectors latest runs,besides the obvious ones everyone here on this site is talking about.
Come on guys bring some fresh ideas/stocks onto this site.
Tim is only a one man band and he is sleep deprived :)
thanks mike, good watchlist, def. post here anytime!
for the guy who shorted ROYL, not sure if thats a great entry, it has a habit of gapping and tanked pretty quickly into the close, could be a nice morning squeeze to short into though
get some sleep Tim… wanna see you play this shit tomorrow hokay
And for the guy shorting ROYL if it makes you sleep any better it did close on somewhat of a shooting star pattern as well as its first red day in the last 5.
I just think these oil plays really need to start making significant breakdowns before it is safe to short. Picking the top is gonna be nearly impossible as we have seen today and yesterday
agreed, but no time for sleep, got a big day for TIMtv planning, 4 articles, catching up on forums now that i can actually post, setting up affiliate program, answering about 200 emails (sorry for the delay!) and write friggin newsletter that hasnt gone out in 2 months!
SHORT INTEREST
HI Tim, Been chequing the short interest on MXC, scary shit.
As of April 30, shares shorted were, 834 779, for an average daily volume of 2650, meaning that at that volume it would take 315 days for the shorts to cover, I guess by now those shorts have covered and were the gasoline that ignited the 2 500 000 shares traded during the last two weeks.
Do you use this short interest indicator in some way? I know it is old info. but I think it may be a good confirmation of an oncoming supernova (lots of shorts at small prices = panic covering)
Let me know your take, and let me have my Timbucks
Bloomberg:
Wrong-Way Bets
Oil’s rally to a record above $135 a barrel came as traders bought crude to cover wrong-way bets that prices would decline, according to data from the New York Mercantile Exchange.
The number of outstanding futures contracts, known as open interest, fell 8.1 percent in a week to 1.36 million at the same time that prices rose 2.6 percent, the data show. Falling open interest and rising prices are signs that traders are buying to exit so-called short positions that would profit if oil fell, and lose money as they rose.
My question is, if oil traders are getting squeezed, how much further can crappy oil short sellers get squeezed, I guess not too much, we are approaching the edge of the cliff….
I meant, how much can crappy oil companiy’s short-sellers can get squeezed, however, if open interest just fell by 8%…. may a serious bigger squeeze can still be in the cards.
Will the crap stay afloat, don’t miss the next episode of your favorite soap opera “The Pumped and the Dumped”
Investorslive’s link (post #49 above) mentioned extremely bullish GTE, and the chart pattern of this one reminds me MNCS (Tim mentioned on his article/video), which has a very bullish chart pattern until one fine day in early Oct 2007!
http://stockcharts.com/h-sc/ui.....lyyay[pb40!f][vc60][iue6,12,9!lj[$spx]]
The chart link above truncated for some reason, here is another one…look at weekly view.
http://stockcharts.com/charts/gallery.html?mncs
Tim, you are The Master and I but a lowly peon-serf-peasant-scum-bag who cannot come to a sound judgment about HUSA and ROYL because I have not watched your DVD yet nor have I read your book; oh will you help me, my kind Lord?
HUSA chart:
http://finance.google.com/finance?q=husa&hl=en
ROYL chart:
http://finance.google.com/finance?q=roy
I’ve got PDO & ROYL reserved. will go long on SSN today
Yo who’s looking at MCRL this morning? Still easy to borrow… dropping to mid Feb support?
whaddya think TIM?
MCRL is too gradual, i dont have capital to spare to even consider it
MXC short interest from last month isnt a factor here, we already KNOW its a squeeze and short squeezes can last much longer than expected, especially commodities as opposed to pump and dumps (which is why if i was disciplined, i’d stick to my “no earnings no commodities” rule
Again, commodities vs. pump and dumps, GTE is a real company, MNCS is not. big difference.
ben, husa is too gradual for me to care, royl will be a good short soon
thanks buddy
FPP is not available to short today!
MXC is not available to short today!
ROYL and PDO are available to short, reserve early!
Ooops, PDO is no longer available to short!!
Watch SOLF. Dropping in premarket down 1$ already.
WTF?
Status Action Quantity Symbol Type Price Act. Price Expiration Reported
Canceled Sell Short 100 MXC Limit 65.00 — 05/22/08 08:51:22 05/22/08
Order No. 3911708125 Mexco Energy Corp Com Entered:08:51:18 05/22/08 Reuse
Order Canceled: We’re sorry, but this stock is not available to sell short.
Canceled Sell Short 100 PDO Limit 39.00 — 05/22/08 08:40:47 05/22/08
Order No. 3911690318 Pyramid Oil Co Com Entered:08:40:42 05/22/08 Reuse
Order Canceled: We’re sorry, but this stock is not available to sell short.
Canceled Sell Short 100 FPP Limit 11.75 — 05/22/08 08:37:07 05/22/08
Order No. 3911679396 Fieldpoint Petroleum Corp Com Entered:08:37:03 05/22/08 Reuse
Order Canceled: We’re sorry, but this stock is not available to sell short.
Canceled Sell Short 100 FPP Limit 11.75 — 05/22/08 08:30:38 05/22/08
Order No. 3911646978 Fieldpoint Petroleum Corp Com Entered:08:30:35 05/22/08 Reuse
Order Canceled: We’re sorry, but this stock is not available to sell short.
Codyhof, shares of this security (SOLF) are currently not available to short sell.
anyone looking at CRED
new post:
http://www.timothysykes.com/20.....ng-higher/
uh dude u gotta reserve shares first…homework assignment, read through the last 500 blog posts or so, then u might be prepared for this game
Ryan- that’s from Ameritrade, right?
Mikey_13th
I agree with adding to the forum, but what’s your basic screening requirement? 500,000 volume? Beta #? Recently in the news?
I think it would be best to throw out good stocks to short, but if we throw out random stocks then there’s a lot to filter.
How about giving some ideas on how to screen for stocks instead of simply saying “add to the forum”.
I’m just trying to be more practical about adding to the forum.
thanks
banana,
I hate to bust on Tims bubble,and not trying to, but dude you don’t have to wait for the perfect set-up imo.
I eat because I trade,in other words I can’t WAIT 2 weeks for the “perfect”( there is no such thing anyway,this is a form of gambling,yeah you can put the odds in “your favor” but they still go wrong,you gotta admit that ).
In other words I TRADE FOR A LIVING, it’s not some account worth $2k and a quick get rich “hobby”
I was questioned yesterday on this site when I said a breach of $7 on SSN was a short signal.
Today it sits at 4.90
I know my stocks and have traded under $10 stocks for 2 decades both long and short,
You screen for stocks BY SCREENING FOR ADR(10) and moves over OR under 15% in the last 2 days.
You screen for stocks ( a scan really not a filter ) that have run AT LEAST 10% 10 times in the last 100 days combined with ADR(30)over 8%.
Do yourself a favor and go read this forum thread:
http://forums.stockfetcher.com.....&qrid=
13th
mike there’s a COMPLETE difference between my strategy and trading for a living…this strategy is ideal for those who want to trade part time or those limited by SEC rules in how many trades they can make….these people CAN’T trade every high probability setup so its right for them to wait for ideal trades. u gotta understand that
Tim,
I respect and do admire what you’ve do/have done BUT I still feel I’m right.
There are folks out there that this isn’t a hobby or a part time thing to them.
You are not reaching out to those folks.
I guess this isn’t your objective and ok I understand that.
But I think you gotta admit, I think there is little difference between a 90% chance of reward or a 60% chance.
The market is a gamble no matter how you look at it and waiting for that what you think is a “90% chance” every 2 weeks is really stretching it.
Anyway peace
13th
correct i can only teach what i know…i tried the 60% setups, but never made much $ that way. whatever works for ya, u just gotta go for it…would you ever consider writing a guest post about your strategy/thoughts, i’d love to feature it