Let's begin by examining the daily chart entering the day:
When examining this chart, here were my initial observations:
- 6/19/14 was the first day of significant volume; therefore, I consider that the start of the promotion. The chart action prior to that is irrelevant to me due to the low volume.
- Every single day since the beginning of the promotion, the stock closed green; therefore, I consider this an overextended stock that should collapse hard when it finally cracks. It helps that it is a known promotion.
- 6/23/14 the stock went significantly red, yet it managed to recover and close near highs. The next day it broke out past $1.55.
- Every day following the breakout, the stock has gone red, yet it recovered to close green. This tells me that a g/r move may not be what triggers a total collapse.
Normally when I'm looking at an overextended daily chart, I'm looking for large morning spikes to short into or a g/r move to signal a trend break and impending collapse. As noted above, in this case I believed that g/r would not trigger the collapse, that it would take a different sort of trend break. During the previous trading day, WSTI had a very strong open before a negative seeking alpha article was published, causing the stock to pull back.
- The low-of-day crack was still a very bearish move. I expected there to be SOME pullback at least, and if the stock looked like it would hold up, I could just close my position for a small gain or loss.
- 10,000 shares is not a large position size for me. If I were to stay patient/stubborn with my position, I knew I could always locate additional shares the next morning and look for a spike to add into short.