{"id":19251,"date":"2022-01-03T07:30:06","date_gmt":"2022-01-03T12:30:06","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=19251"},"modified":"2022-01-03T07:30:06","modified_gmt":"2022-01-03T12:30:06","slug":"one-of-the-most-profitable-short-selling-setups","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/one-of-the-most-profitable-short-selling-setups\/","title":{"rendered":"One of the Most Profitable Short-Selling Setups"},"content":{"rendered":"

Oh sure… it’s all fun and games when prices are going straight up.<\/p>\n

But, as the old saying goes… “What goes up must come down.” And, the more straight up it goes, the faster it drops.<\/p>\n

That’s the problem with parabolic moves. They almost always end badly. <\/p>\n

And when they end, they wipe out a lot of the money of the folks who chased prices higher.<\/p>\n

Of course, it doesn’t have to be that way…<\/p>\n

The end of a parabolic move can actually be quite profitable for traders who can recognize the move is ending and are gutsy enough to attempt a short trade.<\/p>\n

For example, think about the setup in natural gas in September 2021.<\/p>\n

The United States Natural Gas Fund (UNG) – which tracks the price of natural gas – had risen 80% in three months. The chart had gone parabolic.<\/p>\n

Just take a look at the chart below…<\/p>\n

\"Chart\"<\/div>\n

We noted at the time<\/a> that UNG was setting up for “one heck of a reversal trade” for anyone with the guts to make it.<\/p>\n

We also noted that it probably seemed crazy to even think about shorting natural gas into this sort of a move. But, that’s usually the best time to make that sort of a trade.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Because when parabolic moves unwind, the decline often wipes out the entire move.<\/p>\n

And that’s exactly what happened with UNG.<\/p>\n

Take a look at the chart below…<\/p>\n

\"Chart\"<\/div>\n

Traders who had the guts to short UNG into its parabolic move in September were looking at nice profits less than three months later.<\/p>\n

Need another example?<\/p>\n

Let’s look at one of the best examples of a parabolic move ever – bitcoin back in late 2017…<\/p>\n

\"Chart\"<\/div>\n

The black line on the chart shows the parabolic move. The rally started in mid-September 2017. Then, it gained momentum until the chart went straight up – parabolic – in mid-December.<\/p>\n

Then, bitcoin started to fall. And it kept falling throughout all of 2018 until the entire gain from the parabolic move was wiped out.<\/p>\n

Here’s another example of a parabolic move in one of Wall Street’s favorite stocks – Tesla (TSLA)…<\/p>\n

\"Chart\"<\/div>\n

The parabolic move in TSLA started in November 2019 and peaked the following February.<\/p>\n

From there, TSLA fell sharply. By mid-March 2020, TSLA was nearly all the way back down to where it was trading at when the parabolic move started.<\/p>\n

Of course, the bursting of a parabolic move doesn’t crush the price of an asset forever. Tesla and bitcoin eventually recovered and went on to see huge gains.<\/p>\n

So, we’re not talking about holding a short trade as a long-term position.<\/p>\n

Rather, the point of shorting a parabolic move is to take advantage of the decline that usually follows such a move. Once the stock has fallen back close to where the previous rally started, that’s when it’s time to cover the short position and take your profits.<\/p>\n

As I said earlier, it takes guts to short a stock that’s in a parabolic move.<\/p>\n

But if you can get the timing right, then this pattern can produce big profits from the short side.<\/p>\n

Best regards and good trading,<\/p>\n

\"signature\"<\/p>\n

Jeff Clark<\/p>\n

<\/p>\n

Reader Mailbag<\/h2>\n

Have you ever profited from shorting a parabolic stock?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

It\u2019s usually the best time to make this sort of trade…<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-19251","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19251","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19251"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19251\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19251"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19251"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19251"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19251"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19251"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19251"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19251"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}