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How to short stocks



October 18, 2008 – Comments (1)

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

1 Comments – Post Your Own

#1) On October 18, 2008 at 12:54 PM, stockcommander (96.61) wrote:

The time for short selling was when the DOW was at > 14000.

OK hitting the top is about as hard as hitting the bottom, and the bottom trend for the DOW is somewhere between 7000 and 7500. Now is the time for figuring out who will survive and spreading your bets to minimize the risk. If you are 50% right you will make a bundle

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