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FCmatt
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マシュー. Day/Swing Trader. Tech Lover. Risk Taker. FC Barcelona. Taurus. Ox. Warrior of Light. #Karma #NT #IU let's go!
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MatthewEagen.com
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  • Follow Up: How To Short Sell Momentum Stocks

    I wanted to post these 1 minute charts from today, 1/21, to illustrate how profitable short selling can be. These were from my watch list for today. Here is my tweet from 1/17 "$ALIM $LIVE $INFI main watches for Tuesday. Enjoy the three day weekend y'all"

    LiveDeal Inc. (NASDAQ: LIVE) had a gap up out of the open and pushed toward 16. It topped out around 15.75 (round number) then pulled back and made a lower high. This is EXACTLY what I look for. Textbook setup. The stock went on to washout through 11.50. Huge opportunity for big profits. The play was to open the position (1/3 size) around 15.50-15.75 with risk on 16 break then size in on the lower high and ride the trend.

    (click to enlarge)

    Alimera Sciences Inc. (NASDAQ: ALIM) gapped up as well and topped out around 8.25 (round number again). The stock put in a lower high around 8 then went on to flush down through 7. This is not the setup I planned for but I was prepared by coming to the market early and noticed that ALIM was up pre market. Another big opportunity.

    (click to enlarge)

    Jan 21 7:01 PM | Link | Comment!
  • How To Short Sell Momentum Stocks

    I have been meaning to write this post for a few months now. The first draft has been waiting for me since October. Well I decided the wait is over. Here is how I short sell stocks.

    Short selling can be very profitable. For the most part, breakdowns happen faster than breakouts, which is what peaked my interest in short sale trades. Most of the strategy that I am going to describe was taught to me by InvestorsLive, highly recommend his momentum chat. I did some studying to get additional technical and psychological insight to fine tune my strategy. I will continue to tweak it moving forward because "advancement does not happen without change"

    Step 1 - Find overextended / parabolic charts

    (click to enlarge)

    Look for charts that have gone straight up and are ready to pullback. These are charts that are extended from the short term moving averages. I use FinViz as one of my nightly scanners to get ready for the next trading day. I also look at RSI to look for extremely overbought (RSI>90) stocks. Just because a stock had a big move does not mean it is a short. Stocks can stay overbought for multiple days without pulling back.

    Also be wary of huge gaps on earnings / news. These stocks do not have to come back down. Sometimes they just consolidate at higher levels to work out the overbought signal.

    Once I find extended daily charts, there are two setups I really like to look for

    topping candles with long upper wicks and often times volume to confirm the pivot point (click to enlarge)

    stocks that closed strong near the high of the day for a potential gap up on the next session (click to enlarge)

    Step 2 - Be prepared for the opportunity

    Come to market early and ready. Have your plan ready and let the trade setup. I like to look for a weak open with no follow through, a failed red/green move or a gap up and parabolic rush. The failed red/green move works well with the topping candle setup and the gap up parabolic works well with the strong close setup, both of which are described and depicted above.

    I like to use a 1/3 position size to start. This gives me the opportunity to be correct with a wider range. A one-third position allows me to use a stop up to three times my normal risk. The goal is to open your position near the top. Do not worry about being perfect. This is why you use a 1/3 position size. A small starter position takes emotion out of the trade for me. Look for clues such as whole and half dollar marks, round numbers, price action speeding up, etc. More about entries below.

    Step 3 - Wait for a high of day and let a lower high confirm

    Once a lower high is confirmed you have a potential downtrend. Lower high and lower low confirms a downtrend but you do not want to wait for a lower low. You want to add in after the lower high so that you now have a full position size. On washouts this may happen quickly so be ready to act. You want to have padding (unrealized profit) before adding in the remaining 2/3.

    On a failed red to green move, I will wait for the failure then start a short sale position on pops. Notice the failure of red/green near 27 then lower highs and the steady fade. I will add in on the lower high. (click to enlarge)

    On a parabolic move, I will open my position into the fast/sped up, vertical price action. Notice the gap up from previous close then it went straight up or parabolic. I will open my short position into the parabolic then add in on the lower high. (click to enlarge)

    Step 4 - Locate support levels

    You will want to know where buyers have shown up in the past. Many times these are round numbers, whole or half dollar marks. Also the previous close can act as support. Knowing trend line and price support levels allows me to set profit target areas. I usually pay myself on 1/3 of the position just above the first major support. This guarantees a winning trade. Some profits are locked in so emotions are in check. Then move your stop to your add in fill price and let it trade out.

    Notice the 7.80 area support. I would cover 1/3 of my position to realize profits. Then the stock washed out through 7.50 where you can see the bottoming tail followed by higher lows. This indicates a change of trend and time to cover the remaining shares. (click to enlarge)

    Step 5 - Ride the trend

    I am a firm believer in not taking additional profits until there is a reason to. Stay alert for clues that indicate a reversal pivot point (near term bottom) and/or change of trend before covering the remaining shares. The goal is not to nail the bottom but to capture a large chunk of the move. I want to be near the bottom and reversal point. Some things to look for include a long lower tail on a candle and/or higher lows. See daily chart of ARNA above.

    Remember you can always open another short position if the stock sets up again during the day or you can cover only 1/3 on short term bottoming signals if you want to keep a core short position. What I mean is cover 1/3 near first major support, cover 1/3 near the first bottoming signal, and let 1/3 ride. I do not recommend holding short sale positions overnight. The only way I would is if I have a lot of realized profits locked in and there is a high probability the stock falls further such as weakness into the close. Otherwise close out the trade and pay yourself.

    Here is an example of what happens to parabolic charts (click to enlarge)

    I hope this helps. Be patient. Do not fight the trend. Know your plan and execute it. Oh yeah and follow me on Twitter!

    -ME

    Jan 19 6:08 PM | Link | 2 Comments
  • Long Idea Dara BioSciences, Inc.

    Here is what you need to know about Dara BioSciences, Inc. (NASDAQ: DARA)

    There are 14,494,575 shares in the float with over 10% short. 2 million shares in volume can move this stock 10% in one day!

    Buyers will get interested over 1.16 for a few reasons:

    • Price by volume level on monthly chart
    • Stock will be above the 20-, 50-, 200- day moving averages
    • Stock has not been above 1.12 in last 30 days
    • Trend reversal near 1.16
    • 1.20-1.25 magnet area

    DARA closed after hours at .98 today. An entry point around 1 is a good risk vs reward long play. A stop can be place at 0.90 and have enough leeway so you are not stopped out. Although I would accumulate a position on a hard washout under .9 if given the opportunity ;)

    I would sell shares at T1 33% @ 1.16, T2 33% @ 1.25, T3 move stop to 1.16 and let the rest ride. Lock in profits along the way to secure a winning trade!

    The stock put in a hammer candle on nice volume (over 1 million) today. The 50 and 200 period moving averages (1.02, 0.87) are sloping upward on the daily chart. The MACD looks like it is about to crossover to positive as well.

    Below is some information I dissected from the 10-K released today by the SEC.

    "DARA BioSciences, Inc. is a specialty pharmaceutical company focused on the development and commercialization of oncology treatment and oncology supportive care pharmaceutical products.

    We continue to have an internal clinical development program focused on KRN5500, a phase 2 drug targeted for treating cancer patients with painful chronic chemotherapy induced peripheral neuropathy (CCIPN) and we are pursuing out-licensing opportunities for DB959 which is targeted for treating diabetes and is outside the scope of our therapeutic focus.

    We have two lead drug candidates in clinical development with cleared Investigational New Drug applications from the FDA:

    1. KRN5500, a cancer support product for the treatment of chronic chemotherapy-induced neuropathic pain in cancer patients; and

    2. DB959, a first-in-class drug candidate for the treatment of type 2 diabetes and dyslipidemia.

    We are actively pursuing partnering opportunities for KRN5500 and out-licensing opportunities for DB959.

    KRN5500 is a novel, non-narcotic/non-opioid intravenous product for the treatment of painful chronic chemotherapy induced peripheral neuropathy in patients with cancer. The drug has successfully completed a Phase 2a proof of concept study in patients with end-stage cancer and analgesia-resistant neuropathic pain where it showed statistically-significant pain reduction versus placebo (p = 0.03) using standardized pain test scores. There were no serious safety concerns although nausea and vomiting were a common occurrence. The FDA has designated KRN5500 a Fast Track drug, based on its potential usefulness in treating a serious medical condition and in fulfilling an unmet medical need. We have recently improved and simplified the formulation and manufactured new drug substance for the next clinical trial. We are working with the National Cancer Institute (NYSE:NCI) to design an additional clinical trial under joint DARA-NCI auspices. Since KRN5500 would complement our portfolio of oncology treatment and supportive care pharmaceuticals, we are looking to partner the drug with an established oncology development company to undertake and support the cost for the Phase 2b program.

    On November 8, 2012 we submitted a request seeking Orphan designation for KRN5500 to the Office of Orphan Products Development at the FDA. The orphan indication we are seeking is in cancer patients with painful chronic chemotherapy induced peripheral neuropathy(CCIPN).

    DB959 comes from a family of PPAR alpha/delta/gamma agonists licensed from Bayer Pharmaceuticals Corporation. DB959 is a first-in-class, small molecule, non-TZD PPAR delta/gamma agonist for the treatment of diabetes and hyperlipidemia. The drug activates genes involved in the metabolism of sugars and fats, thereby improving the body's ability to regulate both aspects of diabetes. DB959 has successfully completed Phase 1 trials, in which it demonstrated a good safety profile even when dosed at approximately 10 times the anticipated human dose. DB959 is outside the scope of our therapeutic focus and therefore is targeted for out-licensing to partners more able to sustain the prolonged timelines and significant costs involved in diabetes drug development.

    We were incorporated on June 22, 2002. Our executive offices are located at 8601 Six Forks Road, Suite 160, Raleigh, North Carolina 27615, and our telephone number is (919) 872-5578.

    We have incurred significant net losses and have had negative cash flows from operations during each period from inception through December 31, 2012 and have a deficit accumulated during the development stage of $47,027,581 at December 31, 2012. Management expects operating losses and negative cash flows to continue through 2013 and the foreseeable future."

    They have $7,044,827 in assets, $2,038,862 in liabilities, $5,005,065 in working capital and EPS of -0.60 as of December 2012 (-1.20 EPS in 2011). They spent $7,021,194 on operating expenses in 2012. Oh, they have 18 employees and about 170 common stock shareholders of record.

    "If we issue additional shares in the future, it will result in the dilution of our existing shareholders. Our articles of incorporation authorize the issuance of up to 75,000,000 shares of common stock with a par value of $0.01 per share. Our Board of Directors may choose to issue some or all of such shares to acquire one or more products and to fund our overhead and general operating requirements. Our stock price could be volatile and our trading volume may fluctuate substantially.

    On November, 2012, a suit was filed in the US District Court Washington DC naming DARA as a defendant. Plaintiff in the suit is GlycoBioSciences, Inc. Also named as defendant is Innocutis Holdings, LLC, Plaintiff alleges that defendants' distribution and sale of Bionect infringes on certain of plaintiff's patents. Innocutis is required to indemnify us in connection with this lawsuit."

    DARA 60 Minute Chart - notice the 1.12 high from March 7

    (click to enlarge)

    DARA Daily Chart - notice 1.12 and 1.25 price levels

    (click to enlarge)

    DARA Weekly Chart - Price By Volume (PBV) over 1.25 is thin

    (click to enlarge)

    DARA Monthly Chart - this could hit 1.40s

    (click to enlarge)

    Happy Easter! Enjoy the long weekend!

    Article written by Matthew Eagen
    3/28/2013
    MatthewEagen.com

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Mar 29 10:41 AM | Link | Comment!
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