Thursday, July 23, 2009

Exiting Short Positions

Here is an alert I sent subscribers this morning:

I was stopped out of the SPY short (via SDS) for a small loss. Also exited most shorts.

I am NOT taking on any short positions. This is not an orderly pullback. Instead, SPY is showing a strong breakout bar. We'll see if it holds, as conditions are now getting extremely overbought.

While I won't short here, a few more days of bounce would setup "rubber band" shorts, based on extreme overbought conditions (current shorts were only overbought setups, not extreme overbought).

You may be wondering why I differentiate between the two . . .the overbought setup is based mostly on risk and a slight edge. The extreme overbought setup offers a significant edge and I am willing to up my position size.

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