As the market continues to selloff without any real bounce relief you would think that their was not a lot of stocks out there that would not be too extended to the downside. While there definitely is a ton of stocks that have “nasty charts” there are a lot of stocks out there that are still just starting to breakdown and obviously since the market just topped it is going to be weeks to months before these old leaders are ready to rollover.
If anyone needs to know which stocks are looking “toppy,” you can go to the forum section and go into the area where I post all my sales. There you will see two shorting categories called “nasty” and “toppy.” The nasty section is full of charts that have been destroyed and make good shorts on low volume rallies in markets like this. The toppy section brings to attention stocks that are topping on heavy volume, churning, or are just breaking down below their 50 day moving averages on high volume. All of these stocks are excellent stocks to monitor for great short positions.
Even though we are so extended on the downside and are oversold, I assume it is still safe to short these stocks as they are all breaking down from very key technical areas. Therefore, I assume, that if the markets do bounce here, these will either not bounce with the market or will selloff. I just want everyone to know that when it looks like the markets are going to fall apart, they usually don’t and that same analysis needs to be applied to shorts. I see a lot of traders wanting to short a lot of extended stocks. Make sure you do not fall into that trap. Stocks like XL and YRCW are way too extended to short. And shorting stocks in uptrends is just stupid. Only amateur traders and traders who are very thick-headed do this trade, after learning how often it goes against you and how little reward there is compared to risk.
Be careful out there. Don’t get too crazy on the short side with the market down so much right here. It might be best for some of you newbie traders to wait for a bounce.
new short positions: DLR MRH AFG FII XEC
DLR is breaking down below the 200 day moving averages after breaking down below the 50 day moving average, on very strong volume. Cut your first loss with a close above the 200 day moving average and your final loss above the 50 day moving average, if the stock does not move lower immediately.
MRH is breaking down at the crossing of the 50 and 200 day moving average, on strong volume. Cut your loss with a close above the 50 and 200 day moving average, if the stock does not move lower immediately.
AFG is breaking down at the 50 day moving average, on very strong volume. Cut your first loss with a close above the 50 day moving average and your final loss with a close above 30.24 level, if the stock does not move lower immediately.
FII is breaking down below the 200 day moving average after breaking down below the 50 day moving average, on very strong volume. Cut your first loss with a close above the 200 day moving average and your final loss with a close above the 50 day moving average, if the stock does not move lower immediately.
XEC is breaking down below the 50 day moving average and is on the verge of breaking down below the 200 day moving average, on very strong volume. Cut your first loss with a close above the 50 day moving average and your final loss with a close above the 40.96 level, if the stock does not move lower immediately.
adding to existing short position: HMN
HMN is failing at the 50 day moving average, on very strong volume. Cut your first loss with a close above the 50 day moving average and your final loss with a close above the 200 day moving average, if the stock does not move lower immediately.
