My whole point with this entry is that do not be in too much of a rush to short something based on a fundamental reason. You can be right on fundamentals and take alot of heat on a trade. This is why you have to have a good bar pattern on top of the fundamentals. When trading bear flags or bull flags from my experience it is wise to look for symmetry in them. Look at the last one and how much it pulled back against the trend, then wait for a similar bounce which in this case was about $2/share. Today had a good sized move down so just wait until you get about a $2 bounce off the low. This is just a general rule for novices and not how I would enter the trade. The point is location in terms of price on your entry is important.
There is no reason that just because an individual or institution determines that a stock is a good short, that it will just cascade downward the minute you are in. The market could care less who or who is not in. Choose your points with discipline and do not fall in love with your idea. If it goes against you x amount get out and admit you were wrong.
In general trading flag patterns does provide an edge and you should be able to hit over 50% of them. One rule I used to use with them is that once 3 occurred I pass on the ensuing ones, because all trends come to an end. Three continuation patterns on average is what I used to see before they start to shake the tree a bit. ( This means come after the weak hands ) Just look at Jan 06 in this stock, you had three consolidations leading up to that, then they shook the tree a bit for awhile getting all the weaklings out before moving up again.
There is no need to fear unlimited losses in shorts, I have stated this in this forum over and over. In a highly liquid stock you will be filled at your stop probably with just a few cents slippage. Set your stops and ALWAYS honor them.
RS – I told you when we talked at the get together that you were playing with fire on the short sale exits you were doing.
