As of 04/19/2024
  Indus: 37,986 +211.02 +0.6%  
  Trans: 15,084 +136.79 +0.9%  
  Utils: 876 +15.31 +1.8%  
  Nasdaq: 15,282 -319.49 -2.0%  
  S&P 500: 4,967 -43.89 -0.9%  
YTD
 +0.8%  
-5.1%  
-0.7%  
 +1.8%  
 +4.1%  
  Targets    Overview: 04/12/2024  
  Up arrow39,800 or 37,150 by 05/01/2024
  Up arrow16,200 or 15,000 by 05/01/2024
  Up arrow885 or 850 by 05/01/2024
  Up arrow16,700 or 15,800 by 05/01/2024
  Up arrow5,250 or 5,025 by 05/01/2024
As of 04/19/2024
  Indus: 37,986 +211.02 +0.6%  
  Trans: 15,084 +136.79 +0.9%  
  Utils: 876 +15.31 +1.8%  
  Nasdaq: 15,282 -319.49 -2.0%  
  S&P 500: 4,967 -43.89 -0.9%  
YTD
 +0.8%  
-5.1%  
-0.7%  
 +1.8%  
 +4.1%  
  Targets    Overview: 04/12/2024  
  Up arrow39,800 or 37,150 by 05/01/2024
  Up arrow16,200 or 15,000 by 05/01/2024
  Up arrow885 or 850 by 05/01/2024
  Up arrow16,700 or 15,800 by 05/01/2024
  Up arrow5,250 or 5,025 by 05/01/2024

Bulkowski's 8 Tips for Shorting Stocks

This article is based on information from Stan Weinstein's Secrets For Profiting in Bull and Bear Markets, of which I show a picture on the right.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

-- Tom Bulkowski

$ $ $

 

Tips for Shorting Stocks: Do Not Short When...

First, let's talk about what not to do.

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8 Tips for Shorting Stocks

If the above list is what you should not do, how do you short a stock?

  1. Short Stage 4 stocks. When a stock is in stage 3, price moves horizontally. A trendline drawn beneath the minor lows will outline support. The 30-week simple moving average will be climbing up to meet the stock. When price closes below the horizontal (or nearly so) trendline such that it's clear support has been pierced then consider shorting the stock. If a pullback occurs, then you can initiate a short position once the pullback to support completes and it's obvious that the stock is again heading lower.
  2. Short in a bear or weak market. If the market is rising like oil gushing from a ruptured oil line in the Gulf of Mexico, avoid shorting stocks unless the situation is compelling. If the market is trending downward (bear market) or stocks are especially weak, then that's the time to short.
  3. Short weak sectors. You can use relative strength to compare industries. Since stocks in hot industries can continue moving up, look for industries that are especially weak and select stocks from those.
  4. Relative strength should be trending lower. The stock compared to the market index should be trending lower, meaning the relative strength of the stock should show weakness.
  5. The stock should be below the 30-week moving average, and other stocks in the same industry should also be weak (below their 30-week moving averages).
  6. Look for a significant run up. If there is little to reverse, then don't take the short ("the bigger the top, the bigger the drop"). The ideal stock should have an extended uphill run that is now in the process of reversing.
  7. Look for underlying support. If support is nearby then this stock is not an ideal short candidate. Look for stocks which show sparse underlying support as they make their way to the top.
  8. If a head-and-shoulders top or other reversal pattern appears, that's good. Look for bearish chart patterns to bolster your confidence about picking a winner.

-- Thomas Bulkowski

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See Also

 

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