My short of CMED was the best and worst trade of the day. It was the worst because I broke a couple of my rules on it. I let it go too far against me and I averaged down. This was actually going to be a swing trade but it turned into a day trade once the bottom fell out. (A rule that I have taped to my monitor is to take windfall profits!) In my intraday notes today I mentioned that I thought CMED might top around $40. My exact words: "11:08 CMED seems ripe to tank. Maybe $40 will be the magic number..." You can see why on the daily chart -- it had gone up too far too fast.
Since it was so extended and well above its upper Bollinger Band I figured that I could short it near 40 (a nice round number which should be resistance) and hang on to it for a few days while the mania wore off. I was hoping to cover at about $35 next week. As it kept going higher I (stupidly and stubbornly) decided to double down. "Surely it's gotta break" I said to myself while constantly looking at the daily chart in disbelief. Finally the music stopped and you see how viciously it dropped.
I promptly covered half at $36.23 and the other half at $33.975. So my average entry was $40.03 and the average exit was $35.10.
I don't try to short these mania stocks very often because they can be so painful but some of my biggest winners were on trades just like this. I need to study how these things top some more so I can catch more of these in a much less painful manner.
P.S. I guess I owe Cramer an assist based on what I saw on Mad Money a while ago. He wrote a 'pigs get slaughtered' piece on CMED for RealMoney this afternoon. Thanks Jim! :-) Sometimes it really is better to be lucky than good.
Hot dayum! But now I think it is time to buy? It is only up a million % now... ;) By the way, I was particularly shocked to read that you decided to fight the market and double down...and you lived to tell about it! :D
CMED was one of my higher % return trades in recent memory, especially considering time. i bot in the 29's during that 3 day range contraction last week.. sold 1/3 at 36 and the rest at 39.50 today.. on the way up.. (before the move to $42+)
amazing how elusive those last few points can be. i am certanly no genius re: catching tops.
that was one nazzsty afternoon selloff. glad you took em to the bank, mike. i was just out.
Mike, when you said it was a mistake to "let it go too far against me", do you mean that the correct move was to have squared the position at a small loss and to short again higher up?
Mike,
Great trade. I tried to short it around $42 but no shares available from my broker $#%@!!! I was amazed when I saw that vicious sell-off!
Duru,
I think that GOOG buy messed me all up -- who needs rules? ;-)
Buck,
I'm glad to hear that you took a nice chunk out of that rally.
William,
Yes, taking the small loss and re-entering would have been a better option. Of course that assumes that I could have gotten filled on a short once it started tanking.
Sorry to hear that Jim. That's one of the thngs I hate the most about shorting.
Enjoying your blog. Thanks for including be on your links. Have a good holiday.
Nice Trades on CMED. I was on the long side trying to ride the momentum of the previous day. However I did cover my positions upon the breakdown through 40. Not hurt much.
enjoying your blog.
I guess its better to be lucky than good ;o)