Dead Cat Bounces... some ideas for counter-trend trading. I've found that you can book a good percentage trade in a short amount of time by playing DCBs. Timing is paramount, and so you must be nimble. What I like to do is if the stock drops 5% from my initial entry I'll double my position size. If the stock falls 10% from my initial entry I stop out on all shares. To cover the above risk I'm seeking ~20% returns or more. I do not average up. I'm looking to sell into the crowd that wasn't willing to buy until the stock started rising again. LPTH coming off of 5 bucks would be a good example of a recent DCB where one could have obtained a 20% return in approximately 24 hours. Of course this assumes that the trader had timed their initial entry correctly. And so... therein lies the difficulty.
I honestly don't think you can do this profitably without a good understanding of TA, and so I will be using my knowledge of it to help identify bounce candidates. There will be shorting ideas as well. Stocks that have been going up for an extended period of time are equally prone to dramatic reversals.
I welcome any and all contributions from others. A dissenting opinion is fine. I do not intend for this to be a tracking thread for my trades. The majority of what is mentioned here will not be traded by me. This thread is simply for ideas... and as such, there will be no need for boasting.
***For the most part, I'm hoping to learn from this thread by having my thoughts archived. Ideally a few others will chime in as well. Then, through our combined diligence, maybe we'll make a whole bunch of money and live happily ever after. ;-) |
