Shorting DGLY Can Get FGLY!

Here is a short clip from our pre-market meeting on August 25th (filmed at my dining room table in Nantucket;). We take a look at DGLY which was gapping above $9 in the pre-market. I offered some thoughts on how many traders focus on capturing the pull back from $8 to $7 and often miss the larger opportunity to the upside that usually follows.

One thing I have noticed recently is that some of these lower priced momentum stocks are having much larger moves on the second gap up higher. We saw this in TKMR a couple of weeks ago as well. The key to today’s DGLY trade turned out to be the consolidation above 10 the level mentioned in the video. In a raging bull market give the benefit of the doubt to the momo funds when stocks hold above key longer term levels and whatever you do don’t think in % terms for stocks under $20! The large players are thinking in $$ terms not percentages.

Steven Spencer is the co-founder of SMB Capital and SMB University which provides trading education in stocks, options, forex and futures. He has traded professionally for 18 years. His email address is: [email protected].