A Few Short-Selling Ideas
Short-selling can be easier and
less risky if you choose stocks pulling back from their lows. Of course,
those stocks must already be in strong downtrend. No matter how weak stocks are,
they often attempt to rally a few days before resuming their downward move. One
quick way to identify such stocks is accomplished by visiting
TradingMarkets.com’s Pullbacks
From Lows list.
You don’t always have to pick stocks already in a downtrend for short-selling.
Breakout failures also provide us with an excellent list of stocks for
potentially profitable situations. I believe the Turtle Soup Plus One setup is a
nice way to take advantage of false breakouts.Â
The rules for sells are:
1. The stock must make a new 20-day high.
2. The previous 20-day high must have occurred at least three
days earlier. The close of the new high (day
one) must be at or above the previous
20-bar high.
3. Place a sell stop for entry the next day (day two) at the
earlier 20-day high. If you are not filled on day
two, you should cancel the trade.
If you are interested in this setup, you can order the book Street Smarts,
which discusses it even further.
Another way to find potential short-selling opportunities is by spotting a
series of tails at or near the highs.Â
Let me show you an actual example.
The chart above is a daily chart of International Business
Machines (IBM).
As you can see, the stock formed a series of daily bars with upper tails before
breaking down below its support level. This formation is called “high
waves,” and it obviously signals a bearish reversal. Now I would like you
to take a look at the chart below.
What do you think? Is it forming a “high waves”
pattern?
Till tomorrow,