Know when to fold on the shorts

• Posted by Greg Harmon
• on September 10th, 2015

Just like Kenny Rogers said, you gotta know when to hold’em and know when to fold’em. Now he was talking about poker but the same thing applies to the stock market. You need to know when to sell when a trend has ended, either on the upside or the downside.

A good example of this comes up when looking at the chart of Amicus Therapeutics ($FOLD). It had a long run higher from November last year to a peak in August. That is when it gave a signal to sell. The Shooting Star Doji, a small body candle with a long upper shadow was your signal to sell. From that point the stock plunged, created a bear flag, and then plunged again.

It looked to be creating yet another bear flag when it broke to the upside out of it to start this week. If you took the Shooting Star as a signal to get short the name, the break of the bear flag was your signal to exit the short. Now the stock is pushing higher with support form the momentum indicators and opening Bollinger Bands® to continue. It also has 14% short interest which could trigger a short squeeze as more investors cover their shorts. Only that prior high from the Shooting Star stands in the way of your investment shooting higher.

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