20Nov11:57 amEST

A Holiday Squeeze of the Trigger: Chess Moves

olin1 I just placed 4% of my portfolio into a long Smith & Wesson position, at $10.06. My protective stop-loss is if the stock loses $9.80 on a closing basis. SWHC is the heavily-shorted firearms maker. There are a few reasons to be bearish about the stock, in terms of inventory gluts, potential legislative risk, and a chart which has been in a downtrend since June of this year. Nonetheless, the stock has solid seasonality into year-end. And, once again, is heavily-shorted with a smallish float, thus making it ripe for a violent, snapback rally higher. In addition, the daily chart, below, shows the potential double-bottom here with a target of about $11.25, where the 100-day moving average up (and sloping downward). This is a counter-trend trade for me, which only works properly over the long run if I get the proper risk/reward to it, meaning I can define and stick to the firm stop-loss below. Simply put, if I am correct in thesis then the upside should take care of itself. Earnings are scheduled for December 9th. I will sell beforehand regardless of how the trade works. _______________________________________ SWHC

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