Short Selling
Stocks that make strong moves on a news item are an excellent shorting opportunity. The main fundamental theme to remember on shorts is that volume is the lifeblood of momentum and price acceleration. Always check the average daily volume and then compare it with the current volume on the day of the overblown run-up. When volume dies, so does the stock.
Short selling is a tricky business, but those in a position to do a little homework can weed out the most logical candidates for profitable shorting especially during bear markets. Our number-one rule for short sellers is:
Short Selling. Is It Unpatriotic?
Short selling is the opposite of normal (long) stock positions. If you buy a stock hoping it will go up, you are ‘long’ of the stock. But if you think the stock will go down, you can sell it first, and buy it anytime you please. This ‘short selling’ is a simple borrowing-of-stock process that is handled by your broker with no need for you to understand how.
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