Here’s my explanation of when and why you should short Ocado if you want to make £100 profit. At least, it’s what I’m going to do make £100 profit on Ocado….
Remember, I’m no financial advisor and, in actual fact, have only been doing this for a month or so, so please do your own research!
Ok, this is my plan of action on this stock.
I have done very little background research on this company, but I do know that trading conditions have been tough for them the last year or so and a number of key director-level appointments have quit. On top of that, the whole idea of grocery shopping being delivered may have been disruptive a few years ago, but now the major players are all doing it, so what’s Ocado’s unique proposition?
Well, apparently, it’s “Quality groceries that won’t cost the earth”, and, of course, the convenience factor of having it delivered.
But clearly customers are not feeling it and certainly, the market is not feeling it either.
Why am I going to Trade it?
- You can see clearly from the chart above that this stock is in a downward trend that has lasted for more than 3 months.
- There seems to be signs of a resistance level at around 75, which suggests that this price would be top of a trading range.
- The stock is currently at the very start of a reaction – where the share price starts to go against the trend. This may take the price back up close to 75.
Because the general, 3 month directional trend is down, there doesn’t seem to be any reason on the horizon why this would suddenly reverse and go the other way, so whilst it might experience a small rally, the overall trend should continue.
My assumption here then is to open a short position in Ocada when the price reaches 74 with a stop loss in place at 76 and a price target of 70.
I am going to risk £25 per point on this trade, thus risking £50.00, with potential profits of £100.
Follow me on twitter to find out as soon as I place this trade.