Stock Option Class

EWCC: Bearish, Week, Continuation, Confirmed

Bearish Stock Trade

Two types of stocks can be identified in this search. One is in a long term down trend and the other has gone through a long-term topping pattern and is now showing signs of weakness.
Look for stocks that are in a tight descending pattern.
Overall market weakness will enhance the probability of success.
A tight downward sloping trading channel with a 30-45 degree angle produces the most reliable results. The steeper the slope of the trend line, the greater the chance of a reversal. The longer the duration, the more legitimate the trend.
Watch for overall sector weakness.
Sell-offs should be accompanied by strong volume.
These stocks are in the upper or lower quartile of their 52-week range and they should be trading below the 50-day moving average.

The longer-term trend will give us the confidence we need to “climb aboard” and hold overnight positions.
Try to avoid volatile stocks with big daily ranges. We don’t want to get “shaken out” of a sustained move. Take smaller positions when trading volatile stocks.
If overall market conditions are improving, consider reducing the position.
Place protective stops near long term resistance areas.

Focus on strong steady trend lines.
Tight downward sloping channels depict strong moves. Each time a buyer steps forward, the demand is quickly slapped down and the chart never even registers a blip. The stock just keeps grinding lower. A stock that has many buyers and sellers will be much more volatile. As long as there are more sellers than buyers, the stock will continue lower. However, you may get shaken out of the position.
If the stock stalls for more than a week, exit the position and keep it on your watch list for future consideration.

These stocks have moved through a short-term support level and have “confirmed” that they are ready to resume the trend.
Attempt to scale-in and average your entry price over a number of days.
Be patient.