A short trade in DXCM is a real possibility. Why am I saying this? Positive news equals distribution by professional traders. Let me explain.
The image above is the daily chart of DXCM. We can see that the stock is in an uptrend, then on the 29th October there was a positive news annoucement. An earnings announcement was positive and the stock soared. The following news article explains why the DXCM stock soared.
There are two things to look out for, 1, the wide spread up bar and 2. the ultra-high volume. This is typical when there is a positive news announcement. What is realy happening here is that professional traders are starting to sell their stock holdings. The signal that we have on this bar is a sign of weakness, supply coming in.
Professional traders are wanting to sell their holdings so they wait for positive news, knowing that retail investors will be buying. That is why the volume is ultra-high. Professional traders have started their campaign to start distributing their stock and we tend to see price move sideways testing the lows ans highs of the wide spread ultra-high volume bar.
When the distribution is completed by the professional traders, then will see the stock begin to drop. Until then we will continue to see the stock consolidate. When is it ideal to take a short trade? When price falls below the low of the ultra-high volume bar. When this happens then I will patiently be waiting for signs of weakness to take a short trade.
What is likely to occur is a retracement back to the suppo rt level and a sign of weakness is presented to us. The video below outlines in detail what I am looking for, for a potential short trade.