The S&P 500 was down -3.1%, Nasdaq was down -5.4%, Dow was down -1.5%, and Russell was down -4.7% last week.
The churning in the market during the first four trading sessions of last week was difficult to gain any kind of traction in the market, but we kept stops tight and when the market finally decided to sell-off on Friday we were able to capitalize on it, though even that was easier said than done as we got slapped with an upgrade in GS and XRAY was the beneficiary of a fluff piece that popped up on Seeking Alpha during afternoon trading and boosting its shares off of the lows of the day.
Overall the setups were net positive on the week, and considering the week the market had, pretty much anyone would swap places with us. There is some weakness heading into the new trading week, which will improve our overall returns in our three existing positions.
When it comes to shorting a market, I prefer not to get 70-100% short, instead I like to focus on the 30-50% range/exposure and take profits aggressively. Short squeezes and being caught in them can be one of the most brutal experiences as a trader and something you want to avoid at all costs. Should the weakness persist throughout the week, I’ll stick to this principle.
Much of the sell-off from this past week was in Nasdaq and Russell as the larger cap stocks (not including the “FANG”), particularly the stocks listed in the Dow, did not see the kind of sell-off that the rest of the market saw. When I short stocks, I tend to focus on the large caps for the most part, as I prefer to avoid stocks that could easily be acquired by a bigger fish and/or those that are already the subject of a takeover rumor as that is fundamentally, the biggest risk that any short seller faces.
I’m looking forward to this week, and putting together another week of positive returns one trade at a time.
