Shorting Stocks

http://education.wallstreetsurvivor.com/how-find-stocks-for-short
Shorting Stocks

In this bear market it's very hard to find the right stocks to buy and make a good profit from. One thing I have learned is, and it took me awhile to get it through my thick skull, not to look for the best stocks in this market, but to find the worst stocks and short them. People just aren't going to buy stocks that are not producing good earnings, and those that own them are going to cash them in because they are falling and they need money, or just don't want to lose anymore than they already have. So, if a stock is on the down side and losing money quickly, why not get in on it and short it to the max? Buy What you Know, or Buy what makes Money?

I have noticed a lot of people seem to buy stocks because they like the company and think it's a good investment, and that's great! That's how these companies make a name for themselves, because of us, the consumer. But remember: that's not why we are here. We are here to make money: to buy and sell and make profits. You need to be able to set aside your feelings for these companies and make profits off of them any way you can. In this bear market, I see shorting as the best option.

How to Find Good Short Stocks
Find stocks that range from $5-$40 and that are close to 50% off of their 52 week high. Then check the charts to find the ones that are way below the 50 & 200 day moving average, with low EPS (Earnings Per Share) over the last 3 years. Look at one quarter, then look at the same quarter the year before and then the year before that one. If the pattern is downwards, that's a good indicator this could be a stock to short. Another thing to look for is Annual EPS, if each year has dropped, that?s another good indicator this stock is failing and should be considered one to be shorted.

Another thing to look for is stocks that have jumped an amazing amount in a short period of time, a good example is Mexco Energy Corp. (MXC), they were at the $9 range at the beginning of May 2008, and sky rocketed to $48.50 by June 18, 2008, and have since dropped to $26.89 July 7th, 2008. Had you bought this stock long and held onto it and hoping it would come back, you would have lost a fortune, but had you shorted it at it?s peak you would have been making a ton of cash and still going.

Your object here is to research and find these stocks. A few good places to start would be an online stock brokerage, nasdaq.com and not last nor least, right here at WSS. Use the stock screener and then research each stock to find the best of the worst ones out there.

Happy Trading, Stay Green!