Page 436 - THE MARKET WHISPERER

432 PART 12 - Choosing a Winner Stock

I can follow them and perhaps find good technical entry points during the
day’s trading, no matter which way prices are moving. Stocks in the news
tend to be highly volatile. And high volatility is important to me. Every day,
I prepare a list of some five to ten stocks in the spotlight and keep checking
them for technical opportunities. Sometimes I get lucky, sometimes I don’t.

An example of a stock in the news is British Petroleum, BP. The price
crashed due to the leak from the company’s drilling rig near America’s
shores in an event that came to be labeled “the worst ecological catastrophe
in American history.” Anticipated compensation claims reached the billions
of dollars, and a potential total bankruptcy hovered over the company’s
head. For several days we monitored BP in the trading room, and finally,
due to the alertness of an analyst, its day arrived!
Trading Room Trade in British Petroleum, BP

As is common during crises, BP opened with a gap down. Can we
immediately short because of the news? Had you tried to enter a short at
the start of trading, it is highly probable it would have shaken you out at a
searing loss when it rose to close the gap. Later BP moved down again and
provided us with an excellent technical breakdown point when it broke
the intraday support line. Without doubt, this was an impressive short for
a weak stock in the news. The short was executed at $33.45 [1] and the
exit was executed when it first started to show signs of a bounce [2]. For