Late to the QID Party?
In my last couple of posts I mentioned “late to the party” shorts. An example of this is Pete Najarian, who on Thursday’s edition of “Fast Money” recommended QID to short tech. If you took his recommendation and bought some QID in the after-market, or Friday morning, you are already under water on the trade, and may count yourself amongst the “dumb money” crowd.
Why are you dumb? Because you shorted tech at a moment when the market was very over-sold and sentiment was very negative. The only time that makes for a good Fast-Money style short-term trade is right before a true crash. And how often does that happen? Not very, right? If the market crashes on Monday, consider yourself lucky.
QID is at $44. The cost basis for my QID position is $38, and while I was building that position, I didn’t hear a peep about it on Fast Money. So, that makes me the smart money, and Fast Money the dumb money. Funny thing is that on the Friday episode of Fast Money, they put up an intra-day chart for Apple heralding a potential reversal. I predicted that traders would spot a potential reversal in tech in my last post which I published just before Fast Money came on the air Friday.
So now Fast Money got you to short tech on Thursday, and then warned you about a potential tech reversal on Friday. What should you do? I think the chances are very good we will get a short-squeeze rally on Monday. And the more late-shorts that piled on, the more potentially vicious the short-squeeze. If you want to remain part of the dumb-money crowd, you can barf up your QID at a loss and go long with some Apple. That would be really dumb.
However, if you want to get smarter, hold your tech shorts. Endure the pain until you feel like barfing up, and then add to your position. Yep, being the smart money is that hard, and few traders can do it.
Fast Money also had a guy on who told viewers to ignore oscillators. More dumb. Oscillators aren’t magic; they are just another technical indicator. While there are zillions of technical, fundamental, and sentiment indicators, and we must chose which ones we use since we can’t watch them all, none of them are evil - especially oscillators. In fact, I would hazard to say that most traders could dramatically improve their entry points by not looking at prices and blindly trading based on a sort-term oscillator.
In fact, I used an oscillator to top-tick tech on June 5th. That’s right, I bought a tranche of QID right at the very top. Pretty snazzy, huh?
Take that Fast Money!
June 30th, 2008 at 4:39 am
Hey Matt,
Great blog, read it every day. You have made many great calls recently. This post highlights the only thing that concerns me, your confidence.
Are you overconfident? Does this emotion come into play when you are trading?
June 30th, 2008 at 9:09 am
Oil prices driving stocks down again.
Stocks unlikely to rally worth a damn until oil at takes a breather.
June 30th, 2008 at 9:48 am
Hey Matt:
Which oscillator do you use?
Good luck on the shorts!
WTF
June 30th, 2008 at 10:30 am
Crimson Ghost: Are there still people out there buying stocks? What are they drinking?
June 30th, 2008 at 11:15 am
Well oil eased and stocks rallied.
Looks like Matt’s predicted short squeeze has arrived.
June 30th, 2008 at 3:22 pm
Hi Jeff,
I might be over-confident, however that’s a difficult thing to calibrate. While trading, I always choose my entry points with a short-term oscillator, so I am like Spock in that regard. I am very good at selling strength and buying weakness, though it took me decades to learn how to do it!
I realize that this post was rather bold, but keep in mind that I write mostly for the fun of it, and enjoy using an over-the-top style. The market did manage a bounce this morning, and if late-coming shorts held on like I recommended, they had a good day.
Glad you like the blog,
Matt
June 30th, 2008 at 3:31 pm
Crimson Ghost,
Oil finished flat, but stocks took yet another beating. I don’t think a drop in oil can save stocks at this point.
It was a rather weak short-squeeze though, right? Aside from big funds marking up energy stocks for quarter-end, it doesn’t look like there were many other buyers…
Matt
June 30th, 2008 at 3:33 pm
W T F,
I use the STEM models at SentimenTrader.com. A lot of pros use the site. The models aren’t magical, but are very good for choosing entry- and exit points for your trades.
Matt
June 30th, 2008 at 3:35 pm
Hi Larry,
It doesn’t seem like there are very many buyers left. I will be shocked if we don’t get a big whoosh down soon.
Matt
June 30th, 2008 at 5:15 pm
Hey Matt,
Just keeping ya honest!
I do realize you are writing for fun, which is my I enjoy it so much. I figured you for the kind of smart guy that is always willing to question himself in order to maintain objectivity, which you do.
Keep killing the market.