SBRY has been in a trading range since September 2014 of about 290p at the upper bound to around 220p at the lower bound. I see no indication that SBRY is about to break out of this range any time soon.
Long Daily Chart
As I’ve noted before, this stock moves fairly predictably within its price channel. Upon hitting or exceeding its price channels, it usually snaps back at least to its 22-day EMA, and often to the other price channel. This stock has a tendency to make large, rapid price moves. Most recently, its price has fallen rapidly on heavy volume.
Short Daily Chart
The last two days SBRY’s price has fallen rapidly from its upper channel to below its lower channel. As of 10 November, its price has reached a support level in the 232 vicinity. Normally I would look for an indication that its price decline has ceased, then trade this stock from the long side in anticipation of its price rising at least to its 22-day mean. However, given the large gap down on heavy volume on 9 November, followed by another large price fall on even larger volume the following day, I am considering shorting this stock. This selloff looks unusually strong, as indicated by Force Index, and I think it may have further to fall.
In fact, two consecutive large drops in price on atypically high and rising volume is extremely unusual for this stock. I’ve looked its chart going all the way back to January 2000 and have only found a few instances of this happening. Above are two such occasions, and in each of them, as well as in other examples not shown, price continued to reach new lows for at least a third consecutive day.
On the strength of the downturn, I will short this stock at the open the following morning. I will consider any move to the upside to be an indication that I have made an error and will close my position. I will provisionally set a limit order to cover my position at 225p.
Entry: I shorted this stock on 11.Nov.16 at 230.3p (£2.303)
Almost immediately after opening my position, the trade went against me. By around 9:00, an hour after the opening bell, the price had already hit 234.7p and showed no sign of reversing direction. This certainly surprised me, given how forceful the selloff of the previous two days had been. On a hunch, I happened to check SBRY’s historical data on sites I don’t usually use (Financial Times and Yahoo! Finance) and discovered that the data I had been relying on (from Google Finance) was almost certainly incorrect. The forceful selloff I based my decision on was, according to these two sites, not nearly as great as I’d previously believed. The chart I should have been basing my analysis on is shown below.
Given this new information, I immediately decided to cover and reverse my position. That trade is documented in the next journal entry.
Exit: I covered my position at 234.7p (£2.347) for a gross return of -1.91%.