How to Short Stocks With Precision
How do you short stocks with better accuracy?
How can you pick out a of list of 10 stocks, which ones are the best stocks to short?
This is pretty simple. Use a combination of the daily and hourly charts with the 200 period moving average.
You can short stocks with better precision using the 200 period moving average on the hourly charts. You'll be stunned when you see how many times stocks reverse in this critical area on a stock chart!
Take a look at the following stock:
This stock has a classic head and shoulders pattern. But, the circled area is what we are concerned with. How would you be able to anticipate the impending drop? It's hard to tell on the daily chart. Now, look at the hourly chart:
This stock formed a double top right near the 200 period moving average (dotted line) on the hourly chart! This happens often because stocks tend to reverse near that 200 period moving average.
Here are five more examples of stocks reversing near the 200 period moving average on the hourly chart.
The best way to use this swing trading technique is to run a short scan of potential setups off of the daily chart. Move all of these stocks to a watch list and then go through the hourly charts of each stock. Which ones are rallying up against the 200 period moving average? Now look to the left on the stock chart. Is there a resistance area? If the answer is yes, then you definitely want to consider trading the stock.
This swing trading trick will improve your accuracy on short setups - even if you have never shorted a stock before!