Essential Steps for Shorting SPY and The Stock Market

Shorting the stock market is never easy.  However, the market often gives us clues that increase the probability of a successful trade.  Two weeks ago we talked about those clues.

How to identify a market short signal

Since then the market made an attempt at remounting the 50 day moving average.  If SPY had held those levels, the short setup would have been invalidated and we would be back to holding a bullish bias.  I did not let go of my short since the market is showing underlying weakness and the remount was far from explosive.

Today we got the failure of that remount with a huge down move.  Over in the Trade Report we are still holding our short position with our target at the 200 day moving average.

This two minute video goes over the SPY short trade.



http://youtu.be/qYlwLMiVqHQ

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How to Identify and Trade A Market Short Signal

Swing traders need a basket of "goto" setups that can be applied to different markets.  Two of my favorite are the breakout-remount and the breakout failure.  Mr. Market, aka SPY, offered us a little of both a few days ago with a remount that failed.

Notice in the chart above SPY has remounted the 50 dma, then two days later closed hard below it.  Over at BullsonWallstreet, hat was our signal to get short.  So far so good, with SPY continuing the breakdown toward the 200 day moving average.  That is our target, where we will look to at least take partial profits.

If you would like to learn more about how I trade, receive my nightly focus list with market analysis,setups and trade alerts, sign up for a 14 day free trial at BullsonWallStreet.com.  

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Trades: GMCR and AAPL

I exited the AAPL short today at $183 for a nice gain. Stock is nearing support. If support breaks, I may re-enter.

This morning I entered GMCR SHORT based on the breakdown-pullback setup. Stop is above the moving average.

AAPL short

I went short AAPL prior to the trendline break at $292 (see Trade Report). Looking to take profits in the $180-185 range:

AAPL: Speculative Short Trade

I went short AAPL today. Overbought and lots of space between price and moving average.

SPY Short Setup

I like SPY as overbought short setup. Overbought and into resistance w/ little consolidtaion or pullback.



http://chart.ly/qdyyrw

Trade: SDS

I entered SDS today. It is extremely oversold and RSI shows a positive divergence. The last 3 similar states have lead to decent, tradeable bounces.

Short Entry: MON

I went short MON as it pulled back to resistance levels via a bearish flag pattern.

Game Plan for Tuesday

Here is the trade report for Tuesday, along with analysis of today's SPY short and more setups:

http://docs.google.com/View?id=d5z8q8w_1422cfb7fcgv

FCX and PCU: Great Long and Short Setups

PCU and FCX are on fire. Technically, they look great on a pullback to support for long entry. However, they are very extended. Take a look at the distance from the 50 day moving average. I think we are due for a snap back. I will likely short on more strength.

SKX Ready For Pullback

I took a short position today in SKX. The stock is extended and today's indecisive price movement on high volume leads me to believe a pullback is in order.

Short Setup: FUQI

I pointed to FUQI as a short when it was around $30. I took the trade, which would have been successful had I used a wider stop. It's now broke down below the 50 day moving average and is showing distribution in the volume pattern. I will short on a pullback to the moving average, as long as strength is not on strong volume. The setup here is moving average breakdown off a topping pattern.

STEC Short Entry: Time to Take Profits?

Is it time to take profits in the STEC short? Entry was made back on September 24th at $30.75., so we are looking at a 15-20 percent gain.

My general approach to exits is to set a target based on support/resistance levels and take a partial profit at that level. As you can see from the chart, a consolidation zone is in the $22-25 range. Thus, I took profits yesterday around $26.

After taking profits, I move my stop to entry to "lock in" the initial profit. This allows me to stick with the trade if it continues to drop, without worrying about giving back too much. If price reaches the 200 day moving average, I'll take full profits.

Is FUQI Ready for a Fall?

Momentum stocks usually give ample warning before taking the inevitable fall. Is FUQI showing signs?

The X Short Trade

On Friday I pointed to the X short setup, if X was to pullback to the 50 day moving average. We got that yesterday. As noted to Trade Report members yesterday, I took the short entry, with a stop just above the moving average.

This is a variation of the breakdown-pullback short setup.

Moving Average Breakdown in U.S. Steel (X)

X has broke down below the 50 day moving average and looks good for short entry on a pullback or weak bounce.

CPLA Short Setup

CPLA is showing a classic breakdown-pullback setup. The stock broke down below teh 50 day moving average with strong price bears, and now is in the midst of an orderly pullback to resistance.

My Current Postion: AAPL Short

Last week I posted about APPL showing signs of pulling back, but still being a tough read. As Report members know, I decided to short on the once it made a thrust to $170. Overbought conditions, distance from the 50 day moving average and a negative divergence in RSI made it a decent counter trend trade.

AAPL has now hit the first target. I have taken partial profits and moved my stop up to entry level. This effectively locks in a profit and let's the rest "ride".

Is DE (John Deere) a Short Setup?

A Trade Report member sent me an email about DE. Here is the e-mail and my response

I think it is great time to short "DE"? RSI, OBV and MACD are all bearish...plus, the Durable good is bad..

While the price pattern is not bearish, I agree in that RSI is showing a slight negative divergence and the stock is overbought. Resistance at $47-48 gives us an easy to manage trade, with a stop just obove that level. Teh $42.50 pivot area gives us an easy targt. Nice reward to risk.

However, keep in mind there is also a loose cup and handle formation and we could see a breakout at resistance. As long as you manage the trade properly and are willing to take a small loss, the trade is acceptable even with that concern.

Broken Trendline: PALM

I like PALM as a short setup on a bounce. Would have liked to see more volume on the break, but still would offer good risk/reward.