rat-tail etymology and technique
drB is correct in that it refers to the whip-up
at the end of day (typically last 4 minutes or so)
caused by shorts covering into the close. I think it's
because the shape of the chart resembles a rat's tail,
but like the idea of the rats disappearing with the cheese
as well. However, I seem to recall that I just repeated
the term as used by - of course - FLACK! Credit where credit is due. Of course it's possible I did think it up
but forgot.
You can play the rat-tail pattern, but it takes precise timing, quick reflexes. On a NAS downtrend day, look for
stocks that have been selling off all day on some volume,
where it's likely that traders have taken short positions
to make several points in the afternoon. Perhaps the rate of fall is not so great in the last hour, so there are shorts who need to cover at breakeven before close.
Also, the chart looks like it will close above the low
of the day (if it closes at its low fewer shorts will cover). Then, at 4:20 or so, watch closely for
a temporary dip which makes it look like it might weaken
further into the close - and then at 4:27 (4:25 is typically too early) watch for the Ask to start rising.
As soon as that happens, buy at Ask and keep a tight stop.
It can also help to have Level II and watch for the sell orders to suddenly disappear, which will cause shorts to panic-buy... IMHO if you pick these right it's a high-probability for better than 1 pt.
MfN |
