When looking for short sale candidates, many are looking at strong stocks
that they believe is too high.
I feel that it is easier to find short candidates that are weak and have
dropping.
A rally may be a true up trend or just a small rally in a much larger down
trend.
By looking at weak stocks and combining moving average failures, can produce
profitable results.
Drawing Trendlines in a Support and
Resistance Channel
Support and resistance can take many shapes. Sometimes it is a horizontal
line across support and many times it takes the shapes an angled channel.
The drawing of the trendlines is basically the same. You draw them across
the bottom support. Many times you will find the resistance trendline as a
parallel line.
It is a good idea for a trader to be drawing trendlines on their charts to
help them visualize these support and resistance areas. The chart below
does not have trendlines drawn on them. You should print them out and draw
your own.
Print out this chart and let’s draw
these trendlines on Veritas Software
By looking at he chart below, a trader would draw a Support trendline across
the recent support at 110 which occurred November 13. Resistance can be
drawn across short-term resistance at 130.
Today, November 20, 2000, VRTS broke this support of 110 late in the day in
the last hour of trading.
This would have been the ideal entry point.
A short taken just below 110 and a stop at 116, would have been the trade.
It still may not be too late to short VRTS if a morning bounce takes it back
to the 110 area and a stop of 3 % used.
Unfortunately, for longs, many stocks look like VRTS.
Always use stops in your trading.
We are also very oversold, and stops need to be placed on shorts just as
they are on long positions.
