Thursday, June 28, 2007

Today's Trade: SRDX

I bought 500 shares of SRDX at 45.54 (I noted this in the comments of my last post, but didn't get to post it here).

As I stated last night, SRDX was setup as a short squeeze play:

SRDX, a drug stock, broke out over price and moving average resistance on huge volume today. While that's fine and dandy, what's really interesting is that it has a 30 percent short interest ratio. To put this number in perspective, breakout stocks make my short squeeze setup if the ratio is 10 percent or higher. Of the 125 stocks that were on my 3 percent +20 breakout scan, only two stocks came in above 20 percent short.

Do ya think the shorts that came home from a hard day of work and checked there portfolios this evening are panicking? I wouldn't be surprised to see more upside here. A stock that print a huge gap always worries me (since the gap point is so far way), so if I do enter I will use a tight stop just under today's price action, probably in the $42-43 range.

The stock opened at $44.57 and closed at 49.28. I would have loved to catch the open price, but as a part-time trader I can't always be at the screen, and I didn't want to put a buy stop in without being able to monitor the entry closely.

At the moment, I'm looking at a $2350 gain. I thought about exiting at $50 (the high was $50.98), but I decided against it. These types of short squeeze plays can net some explosive gains over multiple days. I'm going to chance that the shorts will continue to hit the "cover button" tomorrow. I probably will sell into any major spikes above $51.


Anonymous said...

Good call! Probably you should start thinking to quit a job and trade for a living!


Anonymous said...

How about TLB for a similar trade? Up 12.44% on big volume, 35% short.

Big Bill

The Market Speculator said...

Big Bill,
Nice looking move. My only reservation is the stock has a lot of overhead resistance and has a major resistance level nearby at $26. My trading style is to trade after resistance breaks, not before. While we could see a move higher as shorts cover, we also could see some selling from those that bought around $26, all the way up to $30.

While we could very well see move higher, it may not be quite as exlposive as SRDX. SRDX had no overhead resistance.

The Market Speculator said...

Thanks P.
I've had thoughts about trading full time. The most appealing things is I could trade more daytrading setups. However, I like the idea of compounding my gains and not having the pressure of having to pay my mortgage through trading.