Look for losers that lose again. Here’s a short idea on Nordstrom (JWN) (November 29, 2018)
If you like Dan’s Chart of the Day and are not yet a member, simply CLICK HERE to join our 30 Day Free Trial!!
We’re looking at Nordstrom ( NYSE: JWN ), here’s why: The company reported earnings and you can see what happened; the stock just absolutely got crushed for a couple days. Then it started to rally higher. You can be buying this dip and all that and that’s fine but we can’t go back that far.
And so what I am looking at as a trader is, I’m looking for stocks that have been broken. I am not looking for high fliers. I am looking for stocks that have been broken and then they try to rally and get back in the groove and then fail to do so, I want to short them on the failure.
That’s what we can do now with Nordstrom ( NYSE: JWN ). You can clearly define your risk here. I have just kind of explained what my thesis is, the stock is down here on earnings, takes a couple days, finally finds a bottom here and then it rallies up. Oh my gosh, it’s up at the 200-day moving average. Great, that’s time to buy the stock, right?
Well, it doesn’t work out that way. The stock tapers off there and now it starts falling below. So I am looking at this, as a short seller, as a well-defined risk. I can be shorting the stock right here at 52.30 and then I keep my buy stop right up here, right above today and yesterday’s intraday highs. Because I don’t want to sit here and be short a stock that starts proving me wrong. I don’t want to do that. I only want to be short a stock that is paying me off.
The closer I can short a stock like this to the “fail” point. The closer that I can be to that fail point, where the stock moves up, tries to get up above the 200 and doesn’t do it, that’s the better time to short. Ideally, if I was looking at this and obviously I wasn’t, but if I was, Ideally, I would be looking at this, this morning and then as the stock started to fall away I would be shorting it right into the morning. Again, I didn’t do that but that’s okay because we can still look at this and, on this daily chart see that you can be shorting this stock here and look for $50.00 anyway.
Deeper than that I don’t know. My admonition to people is, always make sure your shorts are quicker than your longs. You always want to keep in mind that there is an upside bias to the market all the time. In other words, there are always buyers waiting underneath. The only question is, how high up are they going to reach? So when you are shorting a stock just know that as the stock falls lower and lower there is going to be a certain element of traders who are going to be waiting to grab that stock. So you have to be willing to take less profit on your shorts.
That would be my short for you. The high is 54.65. So I would maybe put my stop, I’m not even sure that I would put it above 55.00. If this thing gets up to 54.70 then we are clearly wrong on the trade and so we would want to get out.
Free Chart