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Flipping (Example) - D10

The document discusses flipping positions in trading. It provides an example of a trader flipping from long to short shares of VRSN stock after a huge buyer dropped support. It outlines reasons to short a stock like seeing a huge seller, lower highs, or weak momentum. The document emphasizes flipping positions when certain patterns change, like a huge buyer dropping, as in this example.

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Rahul GK
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15 views2 pages

Flipping (Example) - D10

The document discusses flipping positions in trading. It provides an example of a trader flipping from long to short shares of VRSN stock after a huge buyer dropped support. It outlines reasons to short a stock like seeing a huge seller, lower highs, or weak momentum. The document emphasizes flipping positions when certain patterns change, like a huge buyer dropping, as in this example.

Uploaded by

Rahul GK
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Flipping (VRSN)

Below is an example of a trade to flip. We suggest three plays in which you should flip. When a huge buyer drops is
one of these plays. If you are long because you have recognized a huge buyer, let me repeat a huge buyer, and the
buyer drops then you should flip your long position to flat and then short.

Click picture to view in full size

The chart above is an intraday chart of VRSN. The stock traded up quickly on the Open from below 24.80 to 25.88.
Steve faded this move. He thought the upmove was overdone. The chart indicated it was as well. The chart is too
vertical. Let’s first just review how you start a short position in a stock that you think is overbought. You need a
reason to short the stock. Your opinion that the stock is overbought is not enough. For new traders you should seek
confirmation in the inside market that VRSN is going to go down. You should not just nakedly short VRSN because
you feel the stock should go lower. What will provide evidence that VRSN will trade lower:

1) The stock is met by a huge seller.


2) The stock makes a lower high.
3) The last upmove is not as strong as previous moves.
4) The last upmove is just much faster and the move much greater than previously, thus indicating panic buying.
Panic buying is generally met with a down move as soon as the panic ends.
5) The buying pattern ends of the buyer drops.

Let’s move on to flipping. At 25.55 ARCA held the bid. ARCA made an unusual hold on the bid. He bought and
bought and bought and bought. This was an unusual hold on the bid. If we could provide the best example of an
unusual hold on the bid it would have been this ARCA holding the 25.55 level.

So I got long 1600 shares (2 lots) at 25.56. And ARCA continued to buy and buy and buy. Finally ARCA dropped. So
I flipped my position. I went from long 1600 share to short 1600 shares. The huge buyer had dropped so I wanted to
get flat and then short.

Embedded in this play was a pattern recognition play. The stock traded to 25.50 and INET stepped lower to 25.51
and never lifted. And then ARCA dropped 25.50 to 25.40. INET followed to 25.41 and never lifted. Finally when
ARCA dropped 24.40 and bought at 24.30, INET lifted. As soon as INET lifted the selling pattern had ended. And
getting long would have offered an excellent risk versus reward scenario.

Flipping is a trading technique that you should use. But understand the plays that you should flip. Make your own list
of plays when you will flip.

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