It was time to take my new technical knowledge and see the wedges and supports. One other item I was looking at was the Oscillator, or how overbought and oversold a position is at a given time. Generally the market is wrong 80% of the time. Given that knowledge I've decided to adopt the strategy of betting against the market, given the right circumstances.
Wells Fargo posted 2Q gains higher than expected, which caused a buying frenzy, and their stock shot up. Prior to the earnings announcement, WFC had dropped off from 23 and change to around 20, only to be over bought on earnings news to close at 27.
I was on high alert. The following day, I started watching WFC on five minute time frames watching for patterns. The upward momentum from the day before carried the stock to above 27.5, but showed sings of slowing and created a support level at 27.12. It tested support twice, and I had a sell short order for 100 shares ready to go, if WFC should fall below resistance.
Since it was an overbought position, it didn't have the upward sustaining motion. And when the irrational market saw the stock dropping, they would all sell in-mass to try and cut their previous losses.
WFC dropped below 27.12; I was slow with my trigger finger (and I am not using all of the sophisticated software I could be using to trade), and my order went through at 26.99. I started watching the ticker; WFC started falling, down to 26.60. And then started heading back up. I decided to enter my buy back order and close out my position, at 29.7482. Giving me a profit of about .25. At a hundred shares: 25$.
Okay, so nothing earth shattering, but I had made a succesful trade and built some confidence. I sold my first stock short, and had used technical analysis to create a strategy with an entrance and an exit. I could have held on for more profit (eventually the stock bottomed at 27.55), but hindsight doesn't need those ugly bifocals.
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