Review of a DJT Short Trade

Here is a look at an example of shorting a name experiencing a squeeze, and looking for a temporary exhaustion top with a volume climax and gap up open. Note this is an advanced, high risk reward trade to take.

The most important aspects of the trade were:

  • Not just scaling in to a short squeeze with no clear invalidation/stop out level.
  • Laying out the ideal scenario in advance and acting when it presents itself.
  • Adjusting position/risk size based on how ideal the conditions are for the trade. 

Here is a video showing the discussion in advance, and how it played out:

It is important to note, that my position sizes were smaller for this setup due to the less than ideal conditions of Fidelity having a limited number of short shares available to trade with.

Here was my first entry in pre market, using $57.50 high of pre-market resistance as a key invalidation point. We also had a significant amount of previous price resistance in the $54-56s from May 2024 I was keeping an eye on as far as a potential resistance zone to play off of.

I covered enough of this position into the drop right before the bell rang to get my break even just about $57.50 the key pre-market resistance level. 

After exiting the common shares into the morning weakness, I ended up buying $50 puts that expired that Friday into the halt and drop around 9:40 AM. I was quick to take profit here as well as they were extremely volatile and I am less comfortable trading options than common shares.

You can see selling my 2nd half of the position only 8 of 15 contracts filled with my order on the ask, so I had to cancel that order and sell the rest for cheaper to ensure the position would be filled. 

Lastly, I went long into the extreme short term oversold RSI levels, quickly exiting half of the position to get my break even point under the low of day to be “risk free.” The final sell not shown in the image was just under $48. 

All in all the trade went well and according to plan. If I were to change anything it would of course be having ample common shares to short as well as leaving my bounce position runner on longer, to let the trade play out a bit more.

Feel free to ask any questions!