Here is a simple analysis tool you can use at Seeking Alpha to find stocks primed for a fall.
Watch the comments. When the bulls bellow loudly, it's best to walk away. This doesn't always work in reverse - a lot of bearish comments don't necessarily portend a snapback. But they could indicate that a bottom is, at least, in sight, and that an outright short is inadvisable.
I first noticed this a year ago with Netflix (NASDAQ:NFLX). Rocco Pendola spent most of 2011 hammering the stock (he has since turned more bullish), and the company's fanbois were passionate in response. But the company wobbled, then fell hard.
The same pattern has repeated itself this year with Apple (NASDAQ:AAPL). The traffic around Apple has become so intense Seeking Alpha writers have been limited to three Apple stories per month. That's a function of the company's enormous market cap, but high chatter in the comments did seem to come at the stock's peak, and it has since fallen.
I noticed the same pattern this year regarding Microsoft (NASDAQ:MSFT) and Hewlett-Packard (NYSE:HPQ). When bulls are ready to loudly protest a bearish view, it's a bearish sign. Or, to step outside technology a moment, Chesapeake Energy (NYSE:CHK) - my bearish stories on that oil and gas company drew enormous response from bullish investors, which was followed by a hard fall.
This doesn't work with stocks that have already fallen, and can't get up - even when writers think they should. Take this piece from our #1 tech analyst, Ashraf Eassa. It's a bullish case for Intel (NASDAQ:INTC), leaking a new low-power roadmap. There are four comments, and Intel shares remain depressed.
I think you can go overboard with this. You have to measure the comment level against the market cap. A collection of 15 comments on a thinly traded stock like EBIX (NASDAQ:EBIX), which fell hard after Dustin Small profiled it in September, may be more significant than 50 on a widely-traded one like AAPL.
As an experiment of this technique I identified a popular stock that has gone nowhere lately, IBM (NYSE:IBM). Then I looked for Seeking Alpha articles about the company, and found this one, for November 27, by Scott Wachsler. "IBM Does Not Compute" makes a bearish case, but draws 66 strongly bullish comments. Sure enough, since the story was written, IBM is down about 4%, during a time where the Dow Jones ETF (NYSEARCA:DIA) is up slightly.
If you think about it, this is common sense. Bullish comments come from people who are in the stock, bearish comments from those who are either short or dismissive of it. It's when the protests are loudest, therefore, that a move in the other direction becomes likeliest.
Someone with more technical chops could build an app for this. But I'll settle for Dana's Simple Rule for Share Avoidance. Where the bulls argue loudest, they are most likely to be wrong. Look for your next great investment in the silence. No one seems to care about my bullish stories concerning News Corp. (NASDAQ:NWS) -- so watch that stock.
Disclosure: I am long AAPL, INTC, MSFT, IBM, EBIX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.