CHAP Shorts are Covered
April 19th, 2006 by Grant in: Investing
I covered my Chaparral (CHAP) short shares this afternoon for a narrow loss. After looking at the market action today, I found myself questioning why I was still holding the position.
It’s never good when you are wondering why you are still holding a position, because at that point, you don’t have a plan.
I had a plan for CHAP (I was going to cover at $56). The stock went to $60 and then came back up to where I acquired it. When I saw that starting to happen, I should have covered the position, but I didn’t.
For executing my first short position, it was a good experience. I didn’t lose too much money, and I came to terms with trying to play the bear side of the market. But the most important lesson I learned (which I’ve learned multiple times now) is that you always protect your gains, and take some money off the table.
Will CHAP go back down to $56? Probably, but think about the opportunity costs involved in waiting to see if and when it will.
Tomorrow’s another day, and it’s only money.
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April 20th, 2006 at 1:18 pm
I don’t think your initial plan was too far fetched with support at $56.
I’m going to start looking for short opportunities with downtrending stocks that are nearing 20 and 50 day MAs, i.e. Intel. Let me know if you find any other short opps.
April 20th, 2006 at 1:24 pm
Yeah, I think I was too trigger happy, but being my first short position, I didn’t want to lose my shorts… pun intended.
Remember, that you have indefinite loss potential in short positions, versus long positions where you can only lose as much as you put in.
You might take a look at shorting gold stocks. They are definitely taking a hit today, as are refiners. Some suggest that even though the oil market is holding firm, the stocks themselves are overbought and need to fall a little bit to even out the supply and demand.
I still think we’re on the verge of a significant bear market.