TECHNICAL TRADING – A method to trade the securities by lining
the probability favorable to traders.
TECHNICAL ANALYSIS – The process of finding the best probable
trade setups. There can be multiple different ways to find one. One can use
price actions, or use indicators to perform such analysis.
For a change, I am going to talk about the price action
trade setups. One of my favorable ones is.
Short Squeeze trade.
(caution: the short squeeze data is always delayed to common traders)
This will let us find one of the profitable scenarios, quicker
with little effort.
First I run a quick scan of tickers with high short interest
(30% is my favorable %) 20% + and look for the short ratio (or so called days
to cover) greater than 5 (I prefer 10).
(I am not going over what short interest and days to cover
means, you can find them on google)
Hunting territory (http://www.shortsqueeze.com
) of course I do have a subscription here, and not promoting.
Or you can http://www.otcmarkets.com/market-activity/short-interest-otc
look here for the OTC short interest.
You can use a less reliable and free extracted version from
here, http://www.highshortinterest.com/
Before we move on to the next step, I expect everyone to
have a general idea about the chart patterns.
If you want to assess yourself, here are few questions.
- What is the difference between butterfly and bat pattern?
- Wedge pattern and Inverse Wedge pattern, differences?
- Differentiating a triangle pattern and Flag pennant?
The questions are arranged in Advanced, Intermediate and
Basic chart patterns. So, if you can answer question 1, then you must be a pro with the chart
patterns. If you can’t, I would recommend at least spending a couple of weeks
learning and practicing the chart pattern.
Getting back,
Second step, is finding the favorable patterns from the
short squeeze tickers.
a) Looking for Oversold patterns, i.e.,
30 or less in RSI (I tend to look for less than 38.2 since I run scans during
the weekend, 38.2 is just a fib number)
I have earlier told that I love Overbought, there are some
of the specific oversold patterns I like playing, this is one of them, since
the short interest is huge and the ticker is oversold, I try to play the
breakouts, mostly using stage analysis.
b) Bullish chart patterns favorable for
breakouts
Falling wedge after a breakout, is also an Elliot wave 2, A
breakout candle and a consolidation period can be Stage 1 (base formation) etc….
(there are tons more, only practice make it easy).
Third step, is finding your estimated target and possible
profit percentage to add the tickers to your watch list.
Fourth step, Identify stop loss limits.
Fifth step, executing the plan (Buy high and sell higher).
Last but not the least, Exit when your plan goes wrong. Have
a contingency plan when in a trade, like locking in gains at some obvious
levels of resistance.
CAUTION NOTE – SAFETY FIRST:
DEVICE YOUR OWN STRATEGY FOR EVERY SETUP DISCUSSED, I CAN ONLY SHOW YOU THE TRADE
SETUPS ITS TOTALLY UPTO THE READER TO FIGURE A STRATEGY TO TRADE THE SETUP, DO
NOT TRADE WITH MY STRATEGY, PRIMARILY BECAUSE YOU DON’T /MOST LIKELY WONT SHARE THE SAME PERSPECTIVE.
