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The Short Side

 

How To Spot The Head-And-Shoulders Short-Sale Pattern

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There are at least three keys to a smart search of a stock to short. The first key? Look only at stocks that rise at least 300% to 400% in price to new highs. The second key: Count the number of bases. The more bases, the more likelihood that a good short-sale entry will emerge. (See the April 6 Short Side column.) The third key: Become sensitive to leading stocks as they show days of falling sharply in above-average volume. The Stocks On The Move... Continue Reading »

How To Sell Stocks Short: Look For Second, Third Entry Points

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When you go long in the stock market, you often get more than one opportunity to accumulate shares in a single true leader. When a former leader peaks and begins a long journey south, you also usually get more than one chance to profit on the short side. This monthly column has featured two primary patterns for a successful short sale: the head and shoulders and a fast plunge after a late-stage breakout. The two patterns differ greatly. Yet they... Continue Reading »

How To Sell Stocks Short: Focus On The Base Count

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The following saying may seem obvious. It may also be worth its weight in gold for short-sellers. The bigger they are, the harder they fall. The bigger a stock's run, that is, the more likely you will be able to spot the stock's topping action and thus smartly profit from it. When is a run big enough? In general, the savvy short-seller looks for growth stocks that have climbed at least 300% to 400% from a proper breakout price. So if a stock... Continue Reading »

Is Alibaba A Stock To Short? First Wait For More History

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To sell short or not sell short a new IPO? With apologies to Hamlet, there is no question that it's smart to avoid shorting new issues. The reasons are plenty. Trading In The Dark First, a new IPO simply has too little trading history. It's hard to judge if a stock is in a pronounced uptrend or downtrend. Shorting such a stock on "feel" is no better than rolling the dice. A stock that has traded only a few weeks or a couple of months does not... Continue Reading »

How To Sell Stocks Short: Introducing The L-Pattern

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Besides the head-and-shoulders pattern and the late-stage base breakout failure, a stock might etch a third chart pattern that gives traders an opportunity to capture gold on the downside. The L-pattern does not necessarily show up in every former market winner that tops and makes a huge decline. But when it does appear, you not only get an opportunity to sell shares short. You also get further confirmation of the stock's weakness. IBD research on... Continue Reading »

How To Sell Stocks Short: A 2015 New Year's Guide

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Is making a good short sale or two going to be one of your New Year's resolutions? Such a thought is highly logical given recent market history. Yet, the market can seem to act illogically for a long time. The market's bull run is approaching six years since the bottom of March 2009. That seems illogical, even if the financial system is awash in cash. Some believe the bull market is much shorter. The Nasdaq dived 20.1% in less than 13 weeks in the... Continue Reading »

How To Sell Short: Analyze The Chart And IBD Ratings

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If you want to sell a stock short, asking this question is logical: What are the stock's IBD ratings like when it's time to short? One short answer: It depends. A second short answer: In the case of short selling, most of the ratings matter less. The overall chart action matters a lot more. IBD research has found that two basic stock chart patterns offer the best short-selling opportunities: the head-and-shoulders pattern and the breakout from a ... Continue Reading »

The Short Side: Be Aggressive In Market Correction

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Trying to sell stocks short in a good market is almost like trying to surf on a tranquil lake. You won't have fun, and you won't go far. There really is a right time to sell short, just as there's a right time to enter the market on the long side. For starters, think about shorting stocks only after the market has made a long advance. Then, when you start to see distribution days pile up on either the Nasdaq or the S&P 500 — and when many of the... Continue Reading »

The Short Side: Check A Short's Average Volume

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When you are ready to sell stocks short, do not simply track weak action by a former big winner. Study its daily and weekly charts and identify the ideal pattern. All of these steps are vital. But that's still not enough. Before shorting a single share, take this precautionary step: Check out the stock's average daily share volume before you pounce. If the average daily volume does not exceed 700,000 shares, in most cases the right move is to move... Continue Reading »

Big-Volume Sell-Offs Precede Ideal Short-Sale Entry

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Imagine you've just sold short some shares of a fallen leader. Volume is surging as the stock drops. You're happy. You're making money. Of course, this is the ideal scenario. But how do you really boost the chances that your trade is going to be a winner? It's actually quite easy: look for weeks in which the stock suffers a big decline in huge volume. If that hasn't happened, sit on your hands and look elsewhere. One of the paradoxes of successful... Continue Reading »
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