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Technology Stocks : Visual Data (VDAT) -- Ignore unavailable to you. Want to Upgrade?

To: Sir Auric Goldfinger who wrote (370)	6/26/1999 8:14:00 AM
From: nord	Read Replies (1) \| Respond to of 405

"Don't bother me" "Auric goes both ways" I don't have any problem with Auric or anyone else shorting this or any other stock. My trouble with auric is his self-righteous, turse pedantic, and condecending posts. Aside from issues of capability, investors sense that it is somewhat un-American to sell short and, in effect, bet on a company suffering misfortune. This attitude should be reframed: Are you in the market to profit from up and down price changes or are you in to massage your sense of altruism? Selection of short sale candidates: €Stocks that are in trouble: The stock may be the recipient of a bad earnings report, or any other news that will cause a mass exodus. Remember, it isn't important if the news is really all that bad, it's all important what it is perceived to be. Stocks can be fundamentally healthy companies that are in a temporary sector decline. Or, one company in a sector announces an earnings shortfall and the entire sector drops for no good reason except "the fears." We see this all the time. €Market sector in trouble. They will generally move down together. €Entire market in trouble. Tell yourself, "Wow, it's opportunity time to make some quick money doing shorts, then picking up bargains when it turns up again." €Chart breakdown: Look for support and trendlines broken to the downside by 3% or more. It does not need to be confirmed by heavy volume. Gaps downwards through a support line or uptrend line are known as Signal Gaps or breakaway gaps and almost always are the harbinger of significant price declines. Look at a 6 month chart of AOL (click here.) , running from December 1998 to June of 1999. €Avoid short squeezes: When a stock is really beat up and a number of operators start demanding delivery of the certificates for the shares they have purchased at this beat down price, the resultant "squeeze" comes from broker/dealers not having ownership of enough certificates (they've been loaning out other people's stock) forcing sudden surges of buying, which causes a second wave of buying by shorts covering their positions, further aggravating the losses of short sellers who have not covered. These waves of buying force jumps in price and you see momentum players enter the fray. This can happen during one trading day. The lesson is to not be short when everybody else is. Remember the old adage that says, "When everyone's doing it, it's all over!" So, how do we avoid a short squeeze? When a stock is going up in price, we look for areas of resistance as possible sell points. Thus, we look for areas of support for a buy-to-cover order. We certainly wouldn't buy a stock that has not yet broken past an area of looming resistance nor hold a short hoping for it to penetrate support with short interest rising. Check the short interest: Short Interest is the total number of shares sold short and have not yet been covered. Increasing short interest is bullish, since those short positions must buy to cover. Companies in trouble for some time are likely to be running up short interest due to the fact that it's becoming increasingly obvious to everyone. Therefore, be wary when a stock has a high short interest compared to the number of shares outstanding. Short Interest is published monthly somewhere between the 17th and the 23rd. It may be found in the Wall Street Journal, but I have found Barron's to be the most complete and easy to read source. Remember the rules: €It must break downward and close at or near its low of the day. It should be breaking major support. €There should not be huge short interest. €Check out news stories and analysts' opinions to determine if a stock is a possible takeover or buyout candidate. €Don't buy strong stocks. Make sure the price is more than 20% off its 52 week high. €Never, ever short a stock because you (or anyone else) says it's "overpriced". More short sellers go broke doing this than any other mistake. €Don't anticipate declines. You can't do this. No one can! €Don't misread the chart. You must learn to read charts in a detailed manner if you're going to play this game. €Don't add to a losing position. You don't "average up" short positions. When you're wrong, you're gone. €You must have upside protection. Use a buy-to-cover stop or a cheap call to protect yourself. Stops have a tendency to be taken out by specialists and market makers. €You must hone your skills paper trading before putting money into a short sale. €Never use more than 20% of your risk capital for one short. €Be aware of the uptick rule: A stock must trade on an uptick or go up from no trades before you can go short. €Don't use market orders for entry into a short. €Do use market orders for exits to cover.