How to pick a short ( 1 of ∞ )

These simple rules will help you at the moment of picking a stock to sell short.

a-) The stock must be in a weak group, meaning a sector of the market that is moving with weakness relative to the major indexes.

The oil group could not make a new high on April 14 even though the markets kept on climbing, in fact the oil group has started to trade in what looks like a downtrend.


b-) The stock should be below the 50 days simple moving average. The 50 day SMA is considered the frontier between a stock going down or up. The 50-sma can be used as a support or resistance level.

Forest oil corp. is an independent oil & gas company that is trading below the 50 day SMA.




c-) The stock must be in a downtrend or starting what is perceived to be one. The stock must have stopped the higher-high higher-low movement, and should be at least in the process to make a new low.

The inability of FST to make a new high since march 26 is an early warning of a change of trend, FST has yet to make a new low, but aggressive traders can initiate a short position if FST closes below 26 at the break down of the triangle. Protective stop should be above 28.


I would use the 1% penetration rule to start the short with a 1.5% limit.
The order would be Sell FST short 25.74 stop 25.61 limit.

Remember never chase a stock, if FST opens 5% down or more, wait until it goes to your level, also if FST opens low but closes high, close your short, small and quick losses are the best losses.