Too often than not, a home run hit in profit comes from seeing something that others miss. Finding these opportunities becomes ever so true when talking about shorting.
Go against the grain
Betting against the grain and saying a company will fail is a tough skill to learn, but with time, effort, and research, you can start to see unique patterns unfolding. For example, $GBR, was trading at a high of $14 and dropped to $4. Most people start buying the dip, assuming the stock will come back, but after diving into the company’s fundamentals, you could see they weren’t stable. By doing research I found out that there was insider selling of this stock of 100,000 shares at $1. This to me indicated that the company had no long-term confidence.
Although I missed out on the initial drop, the critical lesson is to not get hung up what could have been and never have a fear of missing out.
To me, it is vital to analyze the topping process of $GBR.
The morning breakout showed the stock Gapping up 50%, hitting $13. It looked as if it would squeeze again after having a slow opening, and for the rest of the day creep to $20. Instead, the stock crashed back to $10, a clear sign that it fell underneath the resistance from yesterday.
As the stock continued to drop to $6, and dip-buying had a little impact, the release of insider stocks reinforced the lack of confidence. Having this background knowledge allowed me to connect the dots and catch the right moment.