This Is One Way To Short A Stock When It Gaps Down

  • March 8, 2005
  • Tsutae Kamada

I mentioned

Golden West Financial (GDW) as a potential short for today. As
you can see, the stock closed poorly just below the confluence of the 50-day SMA
and 38.2% retracement level yesterday.

This morning GDW gapped down at the open. I have received several e-mails asking
me how we should short the stock when it gaps down below our entry points.

Our plan was to short GDW as soon as it traded below 61.53. The issue opened at
61.05, well below the trigger point. What should we do? When this happens, try
to monitor the stock for 15 minutes. Draw a line at the first 15 minutes low.
You will short the stock when it slips below the line.

Shortly after 10:00 AM, the stock violated the first 15 minutes low and
proceeded lower.

T.Kamada

If you have questions, feel free to
mail them to me.