Comments on: KNOT a Buy, Maybe a Short

By: chrisperruna.com » Blog Archive » How to Short a Stock

chrisperruna.com » Blog Archive » How to Short a Stock — Mon, 14 May 2007 13:54:58 +0000

[...] The two basic reasons for selling short would be to profit from a stock that you believe is grossly overvalued (fundamentally or technically) or to hedge your account with protection from a down-swing in prices due to anticipated or unexpected events. I will use the KNOT as an example of the first scenario as it has sliced through all long term trend lines in above average volume. If the stock continually fails to recover these key trend lines, a further decline may be in the immediate future and you may want to profit from this action. In the second case, you may own several stocks and fear a market downturn is on the horizon but don’t want to sell for certain reasons. Instead, the investor can short specific stocks to hedge their account against possible down-turns. Some investors diversify their portfolio with several long positions and a few short positions. [...]

By: IM

IM — Sun, 13 May 2007 23:06:54 +0000

Support looks to be in the 15-17 level. That is probably a good place to iniate a long position.
The uptrend line has been severely broken. RSI is still not at an oversold level. There may be a short term bounce back to $20-21. There is likely to be a test of atleast 16-17 before this stock bases and starts to move back up.

KNOT is worth shorting on a bounce back to 20-21 on lighter volume. I wouldn’t want to short at this level because there appears to be a sizeable short position in the stock. A short squeeze is always a possibility.

Chris, what do you think of NTRI ? Looks to be a very promising cup and handle formation on the daily chart. I also like the volume on the up days. 50 day MA is likely to move above the 200 day MA in a week or so which is pretty bullish from a technical stand point.

By: Tim

Tim — Sat, 12 May 2007 16:40:19 +0000

I’d like to see it rally on weak volume to or slightly above the 50 moving average before thinking of shorting it.

By: Terry Zink

Terry Zink — Sat, 12 May 2007 15:11:38 +0000

It’s tried to rally to the 50-day three times since the top, and this latest one is the latest failure. If I recall correctly, that’s a good time to short according to O’Neil’s books.

By: Trading Goddess

Trading Goddess — Sat, 12 May 2007 05:13:22 +0000

hmmmmmmmm

I was a huge fan of KNOT for that run-up you pointed out.

But when KNOT got slammed around Valentine’s Day … that sort of left a KNOT in my throat. hehe

I am out of KNOT.

I think the fundamentals are terrific still. What I don’t understand is why it is KNOT finding support and just keeps trending down. ???

By: Deborah

Deborah — Sat, 12 May 2007 01:33:21 +0000

I’d be afraid to short this one because of sentiment reasons. I think it will always get undue attention because of the nature of the business.

By: Chris

Chris — Fri, 11 May 2007 20:38:17 +0000

Ty,
I do see support above $15 but the long term trend does suggest a seller’s market with this stock. Again, I don’t have a position established so take it as you will.

Let me know if you do a spread. Also, would you be willing to write an article on the blog about your strategy with spreads? You can e-mail me if you would like to talk about this further.

By: Ty

Ty — Fri, 11 May 2007 20:26:13 +0000

looks like its approaching some support down at 15 (is that right?), interesting to see if it holds that. You are right, its a very tempting short for Puts or a spread.