I'm considering shorting AMGN.
If you're right, and it's in a rising channel, then a line drawn across the tops, and a line drawn across the bottoms, should be parallel. There should be no pattern of declining volatility or declining volume. As the channel rises, the price should break above 55, and hold, and it should do so this month.
If the pattern is a pennant, then the lines along the tops and bottoms should converge. Volume and volatility should dry up to almost nothing, just before the break downward. The lines I see converge at about 55, at about the beginning of February.
If this pattern continues, then near the end of January I may short AMGN. I'd try to do it as close to 55 as I could get. I'd cover my shorts, and take a small loss, if the price goes to 57. If the pattern I see is real, it shouldn't hit 57. If the price declines, then I'd cover at 45, where we held in late October 1997. I'm not sure enough of my 35 prediction to hold my shorts till that point. We may be establishing a new trading range (45 to 55).
I've never shorted a stock before, and I'd only do it with a small amount of money. If it works a few times, then I may move on to more volatile stocks, like Amazon and Yahoo. |
