The Double Play

Whenever you take a short position intraday, you must be aware of

any support areas that may cause the stock to reverse its downward

trend. If the support is far enough below your entry point and

at or near even numbers, an opportunity may exist. I call this the

double play. If you are short 500 shares and feel very confident that

the stock will in fact reverse trend at that predetermined area, you can place a buy limit order for 1,000 shares. Your 500 shares from

the short position will be covered, locking in a profit, and you automatically

go long 500 shares. The 500 shares you are long will ride

the rebound in trend for as long as it lasts. If you are wrong and the

stock continues to go lower, simply sell your long position. I use this

technique on numerous occasions with excellent results. Check

with your electronic broker to see if you may use this tactic. Company

procedures dictate this policy. For example, the placement of

stop orders on the Nasdaq is a company decision.

Figure 6.17 shows a five-minute bar chart of Home Depot after

shorting the stock at $66 1/4. You are in an excellent downtrend that

lasts until the stock hits $65 1/2. As the stock begins to slow its downward

momentum at $65 5/8, you place a buy limit order for 1,000

shares at $65 1/2. Price stabilizes at $65 1/2 and begins to rise. You covered

your short position of 500 shares, taking a profit, and automatically

went long 500 at $65 1/2. As the trend began to stabilize above

the 7- and 17-period EMAs, the S&P 500 began to trend downward.

The stock began to move slightly lower. You sell Home Depot at

electronic trading tactics 163

$65 15/16, taking your profit twice on one stock. You now look for

another high-probability trade.

Whenever you take a short position intraday, you must be aware of

any support areas that may cause the stock to reverse its downward

trend. If the support is far enough below your entry point and

at or near even numbers, an opportunity may exist. I call this the

double play. If you are short 500 shares and feel very confident that

the stock will in fact reverse trend at that predetermined area, you can place a buy limit order for 1,000 shares. Your 500 shares from

the short position will be covered, locking in a profit, and you automatically

go long 500 shares. The 500 shares you are long will ride

the rebound in trend for as long as it lasts. If you are wrong and the

stock continues to go lower, simply sell your long position. I use this

technique on numerous occasions with excellent results. Check

with your electronic broker to see if you may use this tactic. Company

procedures dictate this policy. For example, the placement of

stop orders on the Nasdaq is a company decision.

Figure 6.17 shows a five-minute bar chart of Home Depot after

shorting the stock at $66 1/4. You are in an excellent downtrend that

lasts until the stock hits $65 1/2. As the stock begins to slow its downward

momentum at $65 5/8, you place a buy limit order for 1,000

shares at $65 1/2. Price stabilizes at $65 1/2 and begins to rise. You covered

your short position of 500 shares, taking a profit, and automatically

went long 500 at $65 1/2. As the trend began to stabilize above

the 7- and 17-period EMAs, the S&P 500 began to trend downward.

The stock began to move slightly lower. You sell Home Depot at

electronic trading tactics 163

$65 15/16, taking your profit twice on one stock. You now look for

another high-probability trade.