Short Trade and Breakdown
Topics
- Short Trade
- Breakdown Trade
Short Trade
- Provide short trade information to gauge the quality and profit
for short-term short stock trades from 3 days to 6 weeks.
- Trade Quality
- An indicator that examines the profit/loss ratio, target potential, and target 1 profit.
- Good trade quality means a good target 1 profit, target potential, a low covering loss and a high profit/loss ratio.
- Target 1
- The stock price at which a typical short-term pullback might reach is known as target 1.
- Typical stock pullbacks happen six to twelve times a year and can last anywhere from three days to six weeks.
- The target 1 percent profit is also listed.
- Cover Limit (Covers)
- The percentage loss from the current stock price is shown along with the cover price.
- A cover stop limit is a sell order that is put above the current stock price, either mentally or automatically (via a broker), to minimize losses.
- Stock covers trail the current price and can only be moved in one direction, down.
- Profit/Loss Ratio
- The stock profit/loss ratio indicator is calculated by dividing the target profit by the cover loss.
- Profit/loss ratios above 3:1 signify higher quality stock trades.
- Target 1 Potential
- Analyzes stock support areas that block target 1 and assists the investor in determining whether target 1 is achievable.
- If one or more strong double or triple support areas obstruct the price target, expecting the stock to reach the target might be unrealistic (low potential).
- Target 1 Support
- It lists the support areas between the current stock price and target 1.
- Target 2
- Target 2 is a price attained on an extreme stock pullback, which happens just 5% of the time, roughly 1-2 times every six months.
- It is rare for a stock to stay at target 2. Therefore, some investors might cover there to lock in short-term gains.
Breakdown Trade
- Stock breakdowns are quick pullbacks when a stock breaks below a support area. The next support will usually be a new low area or a distant region.
- Once a stock drops below the lower boundary of the current support area (breakdown level), it often begins to pullback and breakdown.
- A stock is anticipated to hit the breakdown target price following a breakdown. Also shown is the breakdown's cover price and profit/loss ratio.
- The speed at which breakdowns pullback and hit the breakdown target varies.
- The most significant breakdowns are true breakdowns from double or triple stock support areas, where pullbacks usually last for three to five days.
- Continuation breakdowns start from a single support area, and pullbacks have a longer duration of one to three weeks.
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Breakdowns fall into three categories:
- WATCH A watch breakdown stock is currently at support, above the breakdown price level.
- CONFIRMED A confirmed breakdown is a stock that has already started to breakdown and is below the support area and breakdown price level.
- POSSIBLE A possible breakdown is a stock that has started to breakdown (below its support area and price) but lacks bearish indicators and has a mixed possibility of continuing lower.
Disclaimer: This is NOT investment advice, just general help and opinions. Please check with a registered investment
advisor before making any investment decisions. This
document may contain errors. Chapman Advisory Group LLC employees are not investment advisors. Please review:
https://www.stockconsultant.com/disclaimerpage.html