Today during the trading session I tweeted on StockTwits about an excellent $HUM short opportunity, as you can see below.

The funny part about these tweets, and I will let you do the research, is I was called out for these short tweet ideas by a few.  My response to this now is the same as it was in real-time: I kinda do this for a living.  (If you know me at all you know I am teasing the mockers here with humility.)  But it’s an interesting and important side-story to the trade as I am sure some were wondering why I was focusing on the short side in HUM.  Why was I pointing out a short opportunity in HUM?

Here were my thoughts:

1) The first move in HUM was down.  We say Opening Dive.

2) When 81.70 was violated on the Open, HUM had a serious downmove.  When I see downmoves like this, I think there are more to come potentially.

3) A definitive range was established in HUM- 81.70 by 81.25. Why these prices?  81.70 was the level HUM failed from impressively so that became resistance.  81.25 was an area where I spotted impressive volume and intraday support.  Below this level and a downmove was more likely than not.  I brought our newest trainees into our conference room to explain these levels.  They didn’t understand until my fifth explanation so don’t worry if you don’t see these levels at first glance.  Look again.

4) HUM got below the bottom of this definitive range.

5) When HUM traded below 81.25, I liked the weakness that I saw on the tape.  It easily went down.  I like that.  That signals potential weakness to me.

6) The stock was up over 10 points since the close of yesterday, with a pullback possible even if it were to find higher ground over the next few weeks.

My job is not to be right.  My job is not to root for HUM.  I do not give a F*** where this stock trades in a week.  I care about finding spots, as I say “this is the moment”, where placing risk is appropriate (see Figure 1.1).  It is not just appropriate, it is my job.

Figure 1.1

I was not sure that HUM would trade lower.  I was damn sure that this was an area and the moment where the stock could move impressively away from this price.  Thus offering an excellent risk/reward opportunity for us, which I shared in real-time with the trading community.  Anyway, I hope that helps.

Tomorrow we can be better than today.

Related post: Why EBAY was a Buy

Mike Bellafiore

The PlayBook

One Good Trade

no relevant positions