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When Will I Start Shorting Again?

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May 24, 2010 – Comments (4)

Bears are feeling pretty good about themselves these days - and they have every right to. It has been a long time waiting for their day of reckoning, and it finally has arrived for them.

However, this isn't a time to throw caution to the wind.

The market has had a very nice leg down that has broken all of the long-term trend-lines that were in place previously, some dating back to March of 2009. With that said, I believe that the easy money has been made in the most recent wave down, and we should see some kind of bounce in the coming days from the bulls trying to fight their way back into the picture.

Click Here to See My Chart on the S&P.

My belief is that any rally that the bulls put together will be futile in the long-term as it will only be met with bearish enthusiasm to short the rallies that come our way. As for me, I am looking for a retracement of roughly 4-5% before initiating any new short-swing trades. And  believe me I have a list of them I am ready to take advantage of - but for right now patience is the name of the game, and as hard as it is for me, I must demonstrate that often overlooked, but totally necessary characteristic.

As  you can see in the chart I am waiting for that retracement to the 50% to 61.8% Fib level that I believe, will be where the bulls lose their grip on things, and consequently we'll get an even bigger plunge than what we've seen already this month.

Hope you join me for the exciting ride it will be!

4 Comments – Post Your Own

#1) On May 24, 2010 at 7:08 PM, G8BigBoom (66.70) wrote:

That's funny. Most shorts I know still have not made a profit even after this drop. You must really be good to be shorting in a bull market and making money. Best of luck to you.

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#2) On May 24, 2010 at 9:47 PM, biotechmgr (35.41) wrote:

Most shorts you know... I have a big short trade working in positive territory and a stop at even at higher levels.

Bull market... I guess we'll see, but I think we are breaking down again. Could be only one more leg down before a rebound but will see what market internals say about it.

Does one have to be a short or a long to trade market swings? I always wonder that as people are labeled "longs" and "shorts". I am a trader, so I guess I am both, alternately.

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#3) On May 24, 2010 at 9:52 PM, Dintaurran (< 20) wrote:

Fighting the 3:30 Hal 9000 bot and the Trichet floor on the Euro makes shorting very hazardous.  I'm expecting another easy chance in about a month when May home sales reports start rolling in.

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#4) On May 25, 2010 at 2:46 PM, G8BigBoom (66.70) wrote:

That's likely why you have a high score on caps biotechmgr. I wont argue with you.

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