SSS - Thoughts on the Short-Side at 9:00 a.m. "beach-time."

Published:

17 Oct 2011 16:12 ET

Shorts in FOSL and GMCR are working reasonably well here...well, okay, GMCR is working a little bit better than "reasonably well," it's getting crushed, actually. And as shorts in GMCR you have no choice but to love the action. Note that GMCR did undercut its 82.40 low from a little over two weeks ago on October 4th, but we might expect it to push further below that low eventually and move towards the neckline in its H&S pattern down below the 200-day moving average.

Someone mentioned to us over the weekend that an options recommendation website had discussed GMCR as being "bullish" because some institutional investor bought a bunch of 100 calls while selling the 80 puts on Friday a bullish options spread. Big deal. Somebody took the other side of that trade, and it turns out that they were the smarter end on that trade, while the institutional investor shorting the puts and buying the calls is getting hosed as the dumb end of that trade, and we will refrain from making anatomical references out of good taste. This type of stuff is NOISE people - ignore it! Price/volume rules all.

FOSL is rolling over on the right side of its right-shoulder complex within an overall and potential head and shoulders top formation. FOSL remains within shortable range, using today's high as a quick stop.

BIDU has been holding up a little bit better as it remains above its 50-dma, but a high-volume breach of that moving average could signal further downside. We suggested getting short this on the low-volume gap Friday, and so far it is "hovering" above the 50-dma. BIDU remains shortable at current levels, using today's high as a quick stop.

Remember that all stops are suggestions only, each trader must determine her/his own parameters based on her/his risk tolerance and trading preferences. We do implore investors to use maximum 3-5% upside stops on short positions as a matter of general safety.

The market could run into some trouble here as the realization sets in that Europe doesn't have enough money to solve their sovereign debt problems, and if there was a "final solution" then why would it take until next Sunday to determine such a copacetic correction and antidote to European debt excesses. In the meantime, remember that all intellectualization is moot, and ultimately price/volume action rules the day.

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