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  • Wed, May 25, 2016 - 05:28pm

    #6

    davefairtex

    Status Diamond Member (Offline)

    Joined: Sep 03 2008

    Posts: 3130

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HughK-

So shorts are a tough game.  Doing some recent simulations, I noticed that the short candle patterns tend to significantly underperform the long candle patterns over the long haul, given the same relative "goodness" of the setup.

What's more, if the broader market is rallying, its going to make it difficult for your short to do well.  Yesterday's pop in SPX means you're swimming against the tide with any short trade.

AMZN right now is underperforming the broader market (AMZN:$NDX) but it is dramatically outperforming its index (AMZN:XRT).

The saying goes, "throw rocks at the wet paper bags."  Which means, don't try and short stocks that are breaking out to new highs, short the stuff that looks hurt already.  With AMZN, it has broken out to new highs; there is no overhead resistance, no selling pressure from trapped longs to help you out.

Shorts should be like jackals: hunt down the weak and helpless, not the targets with big nasty horns that show a lot of fight.  Pick off the weaker members of the herd, the stuff that's underperforming its competitors, that sort of thing.  Short the rallies back to moving averages.

And if you must short something near its all time high, by all means, if it breaks out to yet another new high, bail out!  There's no upper limit to how high it can go.  There is no resistance.  Run, don't walk.