How to short stocks
Here are some great things to look for when trying to find a stock to short
1. High P/E multiple
A company with a higher P/E has not yet priced in the negative sentiment that you have about the stock. If the P/E is low how much further does the stock have to drop?
2. An event/catalyst which will cause the stock to decrease in value
Is the stock going to miss it's earning estimate?
3. An uptrend that has started to reverse
One of the great ways to identify this is to look for a stock to be below its 50-day moving average
Some icing on the cake would be a company which has done any of the following:
- Lots of turnover in senior management (especially CFO)
- Gives press release/interviews blaming short sellers for the decline in price
- Changes its core business to reflect a trend/hot stock market area