seems as if i have always gone short too early. i even waited until i thought people were selling out on price rises. then the stock keeps rising for another week or two! can someone give me tips on when to go short? i know it's an impossible question, but surely there must be something i am missing.
Only look at the chart
Look for a non-linear exponential rise in price
Look for high volume at the top of the rise
Look for a rising trend in VXN/VIX showing the overall market is becoming more volatile
Get in and OUT quickly. Don't wait for a squeeze. Short trades are not good long term "positions".
Look for lower prior resistance and rising key sma levels as potential support. - Always know before you short where technical support below may trigger a squeeze.
Basically pick your shots and DON'T think you can judge the "market mood" without knowing what to measure. Don't do it on a "gut" feeling.
Don't use everything on your first entry point. It's easier to know you are within a few days of a top than a few dollars(or a given percentage).
So what are you thinking of shorting?
Maybe look into shorting the Nikkei or ETF related to it. 2 potential plays, but I'm not sure if I got these calcs right, so maybe someone who is better with harmonics can back this up.
Potential deep crab setup looking for the C
X = 11870
A = 16020
B = 12310 (.886 of XA)
C = 15226 or 15597 (.786 and .886 of AB)
pull up a 5 year chart, draw a trend line at all the bottoms and all the tops, if you do not have the means to draw on your chart, use a straight edge, you will see a perfect channel, if you believe in it, trade on it, to me it looks like a formation of a head and shoulders pattern. I am saying looks like around 1720 top of the market, you decide, as far as fundamentals go, if the fed wasn't here, we would be below 1500, I would short all the way to 1720, long term options give you the best wins I use SDS or SPXS. double leveraged and triple leverd. im going with January sds calls, they are inverse, best of luck.
you should never short this market... you should listen to the permabulls and buy every day... every dip is another opportunity to add cheaper... you should sell everything you own and buy stocks, they are great long-term investments... don't let the fact that we are at the highest level EVER on stocks, and the mere 150% gain in just 4 years during the greatest global economic slowdown in history deter you!!
Pick what you think is a good candidate to short.
By in blocks of 100.
For evey 100 shares you buy, sell leap calls, ATM or slightly OTM. This covered call is your hedge, and the sale of the leaps will pay for you to be short the underlying.
Buy 2 put options for every 100 shares you are long.
Now, you are short the stock by put options, and if the stock does something stupid like head north, instead of a loss, you will actually make a small gain.
You may get away with closer expiration than a leap, but go out as far in time as you need. The leap is covered by the shares, take what you need to buy the puts.
Give the puts as much time as you can alot to them. I like to try and keep some of the call premium, and still have time enough with the puts. It takes some work to get this position correctly.
If the stock has a dividend it's a bonus.
This is the only way I know of that you can keep taking shots at the short side and actually gain if the market moves up for an extended period, you stay solvent and actually gain rather than shrink your account.
When the market crashes, having a short position can accomplish in weeks, what took years to accomplish on the way up.
What i've tried to share with people here, is a way to be net short, and if the market continues to rally, you make a small profit rather than lose money.
I think there are enough reasons to have this trade going right now.....this thing isn't going straight up forever.