By nature, most investors will go long when buying stocks. A few investors will go short because they really do not have an idea of what to look for. Some investors see the shorting process counter-intuitive to the trading process. The truth of the matter is that there is a greater chance to make profit by going short. But when is the right time to go short on stocks when trading on the stock market?
Look at the chart of the stock you plan shorting? What is the general trend? Is it under accumulated or distributed? It is not uncommon to see a stock that has been in a downtrend to go the same direction for an extended period of time. Many traders will use various technical indicators to confirm the move4 lower. However, drawing a simple pattern may be all that is needed to give traders a better idea of the direction of the investment.
Moving average can also be used for predicting a downtrend. Many traders will watch the price of an asset to break below a major moving average to recommend a likely decline. Robert Janitzek reveals that stocks that fall below a major moving average will usually continue their descent.
Estimates Ratcheted Down
When a company misses its quarterly earnings estimates, management will only try to explain to investors what happened through a conference call or press release. What Wall Street analysts do is send a report and distribute it to brokers. Astute traders will usually short stocks in between the actual release and the time it takes the analysts generates the report . Upon receipt of the report, brokers will usually pull their clients out of the stock or at least reduce their position.
Tax Loss Selling On the Horizon
Robert Peter Janitzek reveals that companies trading in the lower end of their 52-week trading range will trade even lower in the fourth quarter. This is because individuals and mutual funds want to book some of their losses before the end of the year to reap the tax benefits. As such, these types of stocks are perfect for trader seeking to profit from a move lower.
There are several reasons an insider might sell their stocks. They may be in the process of buying a new home or perhaps booking some profits. However, if several insiders are selling the stocks in huge quantities, then it may be viewed as a harbinger of things to come. Keep in mind that execs have extraordinary insight into their companies so use these information to your advantage and short sell accordingly.