Oh man.....
Spreck, sorry to say I couldn't think of a worse time to short F.
stockcharts.com[w,a]daclyyay[dd][pb50!b200][vc60][iUg!Lp14,3,3]&pref=G
The thing is about as oversold as you can get, and it has fallen too far too fast. Worse, there is a ton of supportive volume down there. And, everybody and their brother are short---85 million shares are held short, equal to almost 10 days' trading volume.
finance.yahoo.com
This thing is screaming short squeeze, and if that happens (likely), you're gonna get deep fried.
Also, the market trend is likely against you---I anticipate a short-term rally here, and with that, a kinder, gentler market mood that is not the sort of atmosphere short sellers like to see.
The only thing good about a short here is that the stock is clearly a dog whose huntin' days are done, in the medium and probably long term at least. Of course, that is of no value in the short term.
If you are really really patient, you might get some profit here, but I hope you got nerves of steel or money to burn, because this one's likely gonna move hard against you before it moves any lower. And to move lower, it will have to fail at the solid support currently being created. Not impossible at all, but certainly not a foregone conclusion. That huge volume surge over the last few sessions is NOT the sort of thing you like to see if you are short, because that same level now represents ever-strengthening support, and F will have difficulty failing there.
Personally, when I am looking for something to short, I look for a stock that has changed from an uptrend to a confirmed downtrend relatively recently. Next, I wait for the stock to rally into resistance. If at that point it is overbought, and if there are few shares held short, then I will pay very close attention and look for evidence of failure at resistance. I almost never short a stock unless and until I see clear evidence of failure at resistance after a short-term or medium-term rally. I do NOT anticipate failure, because a stock may rally further and put you deep underwater for a while. And, there is the outside chance that the trend is in the process of shifting from downtrend to uptrend again. The exit point is determined by assessing support levels and overbought/oversold status (the exact degree varies from stock to stock). So if I were short F, I would have already covered no doubt.
Tomorrow it is likely shorts will take profits, creating buying pressure. That tends to build rather quickly, and the resultant short squeeze on a heavily shorted stock like F tends to start triggering stops like a bundle of firecrackers, and thus amplifies the rally.
I really hope I am wrong, but this one has "trouble" written all over it.
My suggestion is to pray I am wrong, set a reasonable stop, then hope for the best. I would not bail immediately since you are in the trade already, so there is at least some chance it could end up profitable.
Alternatively, if you shorted the underlying, you might consider protecting the position by purchasing at the money call options. Given all the unusual volatility lately, options might not be cheap. But anyway, I would definitely set a stop on the underlying. That way, if F rallies, you'll get stopped out but the call position will profit, which will either blunt the losses or, with a lotta luck, just might end up being profitable. If you do that, I''d set a sell limit on the option hoping to get stopped out on intraday volatility. And do NOT buy front month calls... I'd make the expiration at least 3 months away, preferably more like 6.
....all IMHO, of course.
T |
