Looking for a short setup? Don’t take the obvious short. Let’s look at Walgreen’s (WBA). (April 02, 2018)


I Want to look at Walgreens ( NASDAQ: WBA) today and this is why: Frankly, there is not a whole lot to do in the market because of the volatility and the uncertainty; just a really ugly market. I am looking at Walgreens ( NASDAQ: WBA) and I don’t see anything here to do either, except watch and then act. And this is why: If we look at the weekly chart you can see how this stock has rolled over. In 2016 sideways and then 2017 not so good; big sell-off, rally back to a lower high, this is the type of thing that you are seeing, these trendlines of resistance that are gradually steepening, probably going to go even more. Then we have a recent break of support here.

So I am looking at a short trade but you don’t want to be shorting this stock now. It has fallen two days in a row and a pretty healthy decline over the last couple of days. But you don’t see too many instances on this chart, which is again basically in a downtrend; you don’t see too many instances where there are multiple long red bars. Here sure, we got some here but for the most part you will see, like here, two red ones and then a little rally. And then more red ones, a little rally.

What I am saying is, if you want to look for a short trade on Walgreens ( NASDAQ: WBA) don’t short this at the open because it has fallen a couple days. Wait for the stock to come back into this box, this is the last trading range here. You want to wait for the stock buyers to push it up here. That’s what I think will be a bull trap. If it gets up to 65.00ish, somewhere in there, look for some weakness. That will show you that this supply here, all the folks who bought what they thought was the bottom, now are realizing that it is not, they will be wanting to sell to get their money back.

So you look at this stock, it is really weak. Wait for it to rally, then you can sell it at a higher level, which gives you more room to make money. And if the stock starts trading above, say 68.00, that is when you need to close your short. So the idea is that if this is where you are closing your short, slightly above $68.00, if you are looking to close your short there then the closer to that level that you can actually get off your short, the better off you are going to be.

That is how I trade short setups. Don’t short the obvious ones; those are typically the worst trades in the world. Wait until the obvious ones have already started to recover and that is when you start shorting those things.

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