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I suppose "we just know" won't do it for you, but we learned to trade sitting next to some of the best traders in the business and we know what they do by instinct. I guess a trader will generally look to short if a stock closed strong the day before, preferably after a long run-up, and either makes a new high in the morning, churns a ton of volume (distribution) and comes back to below yesterday's close or simply opens lower, i.e. no follow through buying, especially if it is on the back of a newsletter tout or magazine/newspaper write-up, rather than a fundamental material change in the company such as surprise drill results or something similar. The bids dry up, so it the shorts sell the shit out of it and it quickly craters. If the buyers don't come back it opens lower the next day, and at some point a second wave of longs will sell but it does this on lower volume. Then it is a battle between the longs and the shorts, but eventually the sellers finish selling. If you start seeing the stock uptick from support, and creeps up by a few pennies here and there, the pros will begin to cover 1/2 their position, but when the sellers are truly exhausted, there won't be many offers up there and the shorts drive up the prices and that is when we have a squeeze and it spikes to resistance and the sellers come out once more. We will put these charts up live when we get our web site up. |
