Short Trader: Choosing a Wise Entry

So we've got alternative entries here. First, if the stock bounces back to test the 40-week moving average, a short entry at about $49.25 would be prudent because a buy-stop could be placed just above that level -- say, around $51.05. That is minimal risk for shorting into an advance.

Alternatively, a drop below the recent low of $42.44 would signal the continuation of the current decline. So a short entry at around $42.35 could be protected by a buy-stop at about $44.10.

Either way, the risk is less than 5%.

I'd suggest an initial downside target on this short at about $35. I may adjust that going forward, but that seems to define the setup's risk-reward profile adequately.

Updates on Previous Picks

• DRS Technologies (DRS) is finding support at $50, but has not yet reversed, so this short trade is still in play. The entry was at $51.25, and the buy-stop remains at $52.20. Shares of DRS were recently trading at $50.98.
• DuPont (DD): The entry price for this one was $50.10, and the adjusted stop is at $51.05. The stock traded very near the stop level earlier this morning and appears to be firming up. If the stock prints at $51.05, this trade will be closed. Shares were recently trading at $50.40.
• Intevac (IVAC): This short idea offered the entry at $25 in mid-April and hit the target of $20 on Monday. So it's closed out for a nice gain.
• Shares of New York Times (NYT) hit the entry of $24.50 on Monday. But this short setup also had a tight stop of $25.50, which was triggered later that day.

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