LOL!
KKD has set up one more time for another round of shorting. Downward momentum has markedly subsided, and KKD looks like it's trying to finally find a bottom, so it is not as good a short anymore. Still, it's a classic lesson.
The still-declining 50 sma has been a good place for shorts to lie in wait. Just look how many times you could have shorted KKD, just using the simple rule:
SHORT WHEN KKD RALLIES TO THE 50 sma
stockcharts.com[w,a]daclyyay[de][pb50!b200][vc60]&pref=G
I count 6 times in the last year since the monster gap down. Two of those times you would have been underwater for a while, but you would ALWAYS have had the last laugh on the way to the bank.
Maybe it is a little clearer on the weekly chart:
stockcharts.com[w,a]wacayyay[de][pb10!b40][vc60]&pref=G
So now, KKD hits the 50 sma one more time.....
Those sharp rallies into the 50 sma are because of shorts taking profits or getting squeezed out of their positions with stop triggers---KKD has been heavily shorted for a long time, that's why those rallies are so sharp. That does NOT represent bullishness, as you can see by what the market has done with KKD.
The shorts have had a ball with this one over the last year or two. You can too!
Only problem now is that KKD looks like it is finding a bottom.
But the main thing about KKD is that it is a good lesson... this is the rule, not the exception. When a stock detonates with a monster gap down, then that puts it on the potential short list. There is no rush, as you can see with KKD... When this happens, the stock most often will just deteriorate further over the next year or more; rarely, it will bounce back quickly, and usually the key there is that the gap will fill and the stock will successfully challenge gap resistance (KKD didn't, and that's exactly what you want to see in a potential short).
But in any case, after the gap, new resistance has to be defined, and you can see this took a while with KKD.
Once you have decided that it is a good short, and resistance is defined, then you can just lie in wait; every time the stock rallies into resistance, short the shinola out of it. After it drops, take profits, cover the position, then watch for the next rally, and short it again at the same moving average (varies stock by stock). You'll find these things often develop a "personality", and KKD certainly did.
I shorted KKD two or three times... my only regret is that I didn't watch it more closely and short it regularly.
Very nice, thanks.
T |
