Stock Option Class

EDCC: Bearish, Day, Continuation, Confirmed

Bearish Stock Trade

Focus on stocks that are in a powerful short-term down trend.
Look for stocks that have steady (not choppy) downward price movement.
The stocks should not have rallied back more than 5% off of their recent low. Ideally, they have been moving side ways and appear to be resting.
The stocks should be below their 20-day moving average.
Sell-offs should be accompanied by higher volume.
A weak market may apply additional selling pressure and drive these stocks lower.

The powerful down trend may lose its steam quickly. Get in, place protective stops and as the stock drops, trail the stops lower.
If the stock produces nice gains, take partial profits and reduce overnight exposure.
Seek small, quick, consistent profits.
Exit the trade if the market drops and the stock does not.
Exit the trade if the move does not materialize by the end of the next day, or the stock looks like it is finding underlying support.

Look to join a short-term sell-off that is in progress. The stock should have good momentum.
The search will identify weak stocks that are temporarily moving sideways or have rallied back slightly.
Avoid stocks that are trending lower but are very volatile.

The Set-up has formed over the prior day(s) and today the price has moved through a critical price point as determined by the OneOption rule base.
The critical price points identify short-term support levels. Once the stock passes through them the probability of a successful trade increases.
As the support level is penetrated, the stocks will often plunge. Be aggressive but don’t chase the stock. If it gets away, there will be others.
Be prepared to look at fewer trades. Many potential Set-ups never materialize.
Pass on trades that have confirmed on a large gap lower and never rally back. Often, the prior day’s price performance will attract attention and create a sell imbalance before you can get in.
These stocks are often in “no man’s land” and there are no visible signs of support because they have fallen so quickly. They may be over extended and may be prone to a short covering rally. Watch them closely and take profits along the way.