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23 Jan 2008
Choosing a dog
During a bear market, the only way to make money is to pick a dog, and sell it short. I have been mostly cash for some time now and I need to get it working for me.
When I have no idea which direction the market is going (like the last few weeks) I trade based on what the market is doing that day. On 12/11/07 I sold CROX short at $44.60 and bought it back at $42.70.
On 1/7/08 I sold CROX short first thing in the morning at $32 and have been holding ever since.
The market has been taking an absolute BEATING for the last month or so. The dow is down almost 3000 points and fear of recession is looming. I need to start finding stocks that I want to be short through this. I am looking for high flying fads. Expecially ones where the chart points to a potential gap down.
My first find so far is VMW. I loved the stock when it IPO'd. I think it it had too large a run and could break down if the market crumbles. There is some serious support at 71 which has been tested 3 times now. I think next time it tests the 71 level it will bust through. I went short this morning at $77.55 and will put a stop at about $80. I will look to buy back at its IPO price around $50 (if I can wait that long).
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