I reckon it’s been more than a week since I last posted a “Trade of The Week”, and this one is different in two respects:
- It’s a short trade, which is pretty unusual for me considering my predominantly-long position trading approach.
- I’m documenting it in advance rather than after-the-fact, so I really have no idea how it will turn out.
My rationale is that, according to the Capital Spreads chart below, the Aviva share price “gapped down” as low as 240p-per-share initially this morning (7 March 2013)… so unless this was a mere mirage, the price could easily head that way again. The lower horizontal line that I have placed on the chart indicates my short-selling price.
Am I confident about my “prediction”? Not at all, which is why I have one of the excellent Capital Spreads (though it could have been InterTrader) guaranteed stop orders in place to take me out of position for a small loss if the price rises back above the apparent flat-line. This protective stop order is indicated by the higher horizontal line.
If the price falls again tomorrow, as I hope it will, then the immediate objective will be to trail my guaranteed stop order to at least below my entry price before the price rises back up to meet it. Beyond that, it will be a matter of deciding between a) taking the profit on a target of ~250p-per-share or b) holding on for the longer-term (short) position trade.
I’ll keep you posted.
Two Steps to Better Spread Betting:
Disclaimer: this posting is for general education only; it is not trading advice.