Trade Idea MRX (short)

I'm not a huge fan of shorting bio-techs and you my want to check to see f they have anything in the pipeline that is going for regulatory approval any time soon. Otherwise, this is exactly the kind of chart I find to have some of the highest probabilities.

 MRX (weekly chart) just recently made a 2.5 year high a couple of days ago. Check out the red volume on the failure, it's actually the biggest 1-day volume spike in the trend.

 Here MRX goes for the new high on an intraday basis and can't hold it above resistance, a pretty typical head fake that we see so often before a major reversal, you can almost count on a head fake being there before a reversal for reasons that are not too hard to figure out, they allow the locals to get good positioning, they play on technical traders biases and allow the locals to short into demand without raising any suspicions and the head fake adds momentum to the downside. The swing trend up is clearly broken on yesterday's gap down.

 Most of all, we have good 3C confirmation. This 60 min chart shows distribution at the breakout attempt and is currently in a leading negative position, other then the daly harts, the 60 min is the most important timeframe with the furthest reaching implications when it produces a divergence. When we have multiple timeframe confirmation, it's that much stronger.

 Here the 30 min chart (as with each shorter time interval) shows more detail, distribution appears to have started in June. Note again, the worst divergence is on the breakout attempt.

The 15 min chart which is the shortest timeframe that can produce a divergence powerful enough to cause a reversal, is also in confirmation with the worst divergence again at the head fake breakout.

I don't know if the gap gets filled, it would be best if it remained unfilled as a breakaway gap, but even here at $38.54, this looks like a decent short position, even using a stop at the recent intraday highs of $40.51 with less then 5% risk on the stop (this is not to imply the 2% risk rule shouldn't be followed through position sizing).