Looking for a short squeeze? Check out Retrophin (RTRX) (February 09, 2017)
A random stock today. Remember that Martin Shkreli dude? Totally bad guy right? I don’t know if he is or not, but lets just say he doesn’t have the most stellar reputation, but he may be an absolute saint with a bad rap. This is his former company, Retrophin ( NASDAQ:RTRX ), I know this pattern. You see big, big volume today. The company doesn’t report earnings until the 23rd. Typically this stock does not trade a million shares, it trades less than 500,000, usually. So we get a big move today. Not huge, but it is big. Short interest, about 18 days, 26 percent of the float is short. That means that with this kind of volume, think about it, lets say you are a fat and happy bear. You don’t look at charts much otherwise you would have already covered, but you are a pretty smart guy. Most of the bears are folks that short stocks in any kind of size. They are really looking at the company and they have infinite confidence in their wisdom.
So lets say you are still short the stock. Okay, well now what starts with ‘s’ and rhymes with hit? That is what you are saying now. This is up and this is on a breakout on volume. So I look at this from just a technical, from a trading standpoint, and I am looking at higher prices on this stock just on a run into earnings, which is still a couple days away. So how are you going to trade this stock? We will go down and look at the 15-minute chart (we will bring it up to present day), most of the volume hit first thing in the morning. The stock is now at 21.19, forget about this red line, that is for the 50-day moving average, only since we are on a 15-minute chart, still 50 periods of 15-minutes each, totally irrelevant.
You don’t even need to go down all the way down to today’s intraday low or even the open; I would keep a stop at 20.80, something like that. So you are risking about 40 cents in buying this stock. The whole reason you are buying it is because you believe that this has strong upside momentum and it is going to keep going. Which means that if it pulls back to this level then it really doesn’t have strong upside momentum. It was perhaps just a one-day wonder. Now, as we look at this chart here on the daily chart, 20.80. I can’t really reinforce that, I think you have got to go lower, we’ll say 20.40, something like that. That is the type of capital that you would need to risk, 20.80 is too snug, you could get clipped intraday. But if this stock pulls back to 20.40 or 20.30, then you don’t want to be in this trade anyway because it is a fakeout, not a breakout.
So anyway, hopefully we can make some money off or Martin Shkreli’s last company.