A selling stock short is part of my trading system. I trade both directions of the market moves, bullish uptrend moves and also bearish downtrend moves. There are always some opportunity for a bullish trade and also opportunity for a selling stock short.
It is not wise to look for short selling pick when an underlying stock market trend is in strong uptrend. Therefore I always check and analyze todays stock market trend before I run my personal screeners. If the market mood is bullish I run only bullish screeners. If it is bearish then I run only bearish screeners.
A neutral market situation offers a possibility to trade both directions. The really good opportunity to sell stock short is to find some pick where share price trend just changed. The more drastic change the better.
Finding some gap on a stock chart is such indicator. The sudden price decline due such a gap is like cold water for most bullish traders and investors. They start to feel unpleasantly and many of them panic. It is ideal situation for selling such stock short.
TCO bearish trade
I did this bearish TCO trade some time ago. I found it using my personal screeners formerly as bullish opportunity. I have placed it into a bullish watch list. After a few days I have noticed huge price gap on the chart. I wanted to delete this ticker from the bullish watchlist. But as I understand importance of these negative gaps I rather moved it into the bearish watchlist.
I monitored TCO shares development during next days. I noticed how price reversed in the area of moving averages and started to drop again. I watched an intraday action of TCO shares. As I noticed their huge bearishness I prepared trading setup. I finally entered a trade on 25.9.2012 during an extreme decline. My entry price was under the 78 USD.
I set my stop loss and place TCO ticker into my watch list as opened position. I monitored it continuously in next days. The price moved down every other day as selling continued. Finally I noticed that during 1.10. the price reversed its decline and started to rise afternoon. Trading volume also increased above an average level.
Both these signals were red flag for me as it looked like some buyers stepped into action again. They started to buy shares near 76 USD area again. They outweighted sellers and their selling volume.
Using this knowledge I finally decide to close my TCO position near market close hour. The exit value of shares was 75.95 USD. The result of this trade was a profit and I made almost two points with every single share I use in this selling stock short trade.