Monster Stock T...'s  Instablog

Monster Stock Trader
Send Message
  • Short-Selling: What are we looking for? 0 comments
    Jan 31, 2010 12:37 PM | about stocks: ARO, FAZ, TZA

    The current correction has been swift and we've profited nicely with inverse ETFs.  However, we much prefer to find short setups giving us the highest probability of gains.  The following charts will show what we are looking for.

    ARO has been a stock we've mentioned in our Chartist Choice Daily and our Newsletter.  Since we've seen the stock breakdown a bit further we'd figure we'd release what we are looking for in shorts.

    As you can see we need to see a BIG run up on the left side of the chart.  The larger the better, but it should be at least 100%.  Secondly, if you notice we don't try to call a top in a stock.  If you were calling tops in June, July, August, September, October, and November you were burned.  We want the highest possibility of a breakdown without a surprise move higher.  As you can see ARO ripped off the initial move down shaking out shorts.  We look for stocks who made a top at least 5 months ago as this time allows for weak shorts to be shaken out and longs to believe the stock has bottomed.  The next chart will show a closer look at the current action.

    Price now under the 50dma confirms the weakness in the stock.  A word of caution is the 200dma is not rolling over just yet.  While the 200dma is not rolling over it doesn't negate the pattern.  It is still valid with a slight flaw.

    When shorting stocks it is wise use a tight stop and take profits quickly.

    Disclosure: Short ARO Long FAZ, TZA
    Stocks: ARO, FAZ, TZA
Back To Monster Stock Trader's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers


  • The hardest part of trading is holding onto your winners and cutting your losses
    Sep 3, 2010
  • Market continues to act well with the best stocks leading!
    Sep 3, 2010
  • Solar is hot hot hot
    Sep 3, 2010
More »

Latest Comments

Most Commented
  1. Where are we heading? ( Comments)
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.