January 28, 2021
By now, everyone knows about the shenanigans that have played out on GME and a few other stocks. I figured I’d document some of the times I’ve profited from its parabolic rise (and subsequent decline).As you know, I created a Parabolic Rising Stock Scan Find such a case.
GME first appeared in scans on January 13, then it is still Over 500% since then! Sadly, I can’t say I bought it at the time. Being long parabolic doesn’t suit me– I actually wrote scan to find short term candidates.
Here’s the chart for the day:
I had to scroll the last few days off the page so you can see how strong this move is. Looks like nothing on the current graph:
Here is the Bollinger Bands chart. Flying above the upper Bollinger Bands made me feel much better about the looming chance of mean reversion:
Here are a few reasons why I generally don’t like to be long parabolic stocks:
- The risk of their suspensionespecially those who rose for no reason.
- I like to buy support nearby so I can define my risk and stop loss levels.
- I prefer to buy pullbacks. I would also consider buying breakouts above trendlines, sideways/straight resistance, or moving averages. But my mind/personality has no desire to buy anything after it breaks above the upper Bollinger band. I usually feel at that point that I’m the fool that the people who bought low are selling to.
I usually see if I can figure out why the parabolic move is happening and then, if I think it’s a false move, find a place to short it.Over the years, after being caught in some short squeezes i learned some lessons About chasing porter like this:
- They can rise much higher than I can imagine. So please be patient.
- Check out my brokerage’s lending fees. Usually costs 80% or more. If you end up holding the position for a few days, it is very difficult to make a profit.
- averaging might be a good idea
- Sometimes extending the trading hours will give you a good entry point.
- Probably something else I can’t think of right now.
On the 13th, I added GME to my “potential short” watch list and I’ve been tracking it ever since. It formed a huge (bearish) shooting star candlestick on the 25th. That did get my attention, but then I also started hearing about how the Reddit/WallSttreetBets mob was trying to force some hedge funds out of their GME short positions. I also follow one of the main targets Citron on twitter and I see them/him screaming bloody murder. 🙂
When GME nearly negated that shooting star the next day, I knew things were going to be very interesting. Then the next morning (yesterday) I saw it was Up about 100% in premarket trading Thanks in part to a tweet from Elon Musk.right now I am Slobber Short! Then I saw the GME short squeeze mentioned in a mainstream media mobile show. It made me think: “OK, we’re nearing the end”. Here’s my tweet from yesterday morning:
so $GME Madness has made it onto mainstream media morning shows. This *must* be the end of the party – right? ? ? 🤔🤷🏾♂️ Feels like an old Barron’s or Sports Illustrated cover curse. pic.twitter.com/893GkQgzVw
— Michael Cenezza (@TraderMike) January 27, 2021
I’m still a little wary of shorting GME because I know the story is spreading and”They can rise much higher than I thought’ popped into my head. So I think”Is there any other method Can I effectively short GME? ” This lets me check ETFs that hold GME stock. So I went GME page And click the “ETFs Holding GME” button.
of Of the ETFs listed there, XRT stands out Because the graph clearly shows that GME has a significant impact on it.it is much higher than it is Upper Bollinger Band, so I figured I could use a retracement to the upper band as a first target. I also like how liquid XRT is compared to other ETFs with GME exposure. In the end, XRT is volatile enough to make it worth trading, but not enough for me to worry about being slaughtered if I hold it overnight.
So at 9:41 I decide to short 200 shares of XRT at 87.80. The GME Story *real* patrol during the day. I started getting questions about it from friends who didn’t follow the market and even people overseas. It actually makes me more confident that we’re getting close. Meanwhile, XRT was choppy throughout the day, closing at 91.49. I’m a little frustrated, but I’m not too worried.
So this morning I woke up after 6:00 and saw that GME had crossed $500, but quickly fell back to the low $400s. I thought “damn, I’d love to sell GME for closer to $500”. After a while, it started to bounce and I decided to take a small short position. By “small” I mean small enough that I wouldn’t curl up in a ball and cry if they ran it to $1,000. :-). I was able to short 10 shares at $458 7:53.
Soon after I’m starting to see headlines about Robinhood and Interactive Brokers limiting GME trading to “clearing only” – something I don’t remember seeing in my 25 years of trading.
I was lucky enough to sell my short before my broker, Interactive Brokers, stopped allowing new GME positions. IB also raises GME borrowing fees to 300%, so I know I won’t take this position overnight! Now I think I’ll just have to sit back and wait for the bottom to come off. easy to say, hard to do. GME is trading like a wild horse. It will drop like a rock, stop, bounce back violently once it recovers, stop, drop, chop, stop….
GME must have stopped 20 times today! This is another reason I don’t like trading parabolic movers – I know they can stop, and I generally don’t want any part of the trade to stop. Sometimes they even stop stocking for days or weeks.
Once GME did start to drop, I tried to cover my shorts without success. After it broke 200, it started to drop, but it stopped until my order was filled. It slides all the way to 112 and I still can’t fill it up.thank goodness I decided to buy XRT during that time and was able to buy the shares back at $78.54. Finally I Bought GME for $247 Gained 46% at 11:45. Not bad for 4 hours of work.
