On 15 February, Swing Trading Blog | What are the best models of candlestick for shorting Stocks?

Written on 15/02/2008 08: 52 by Craig

If you could only trade 3 candlesticks for shorting stocks, what would they be?

I asked this question by email and it me did not take very long to find an answer. I trade again and again the same candlestick patterns!

Here are my top 3 bearish candlesticks:

It's my favorite of all time on the short side. The key of this candlestick pattern is in having a long tail and a small real body. A rally to a major resistance area and an increase in the volume of the previous day are other factors to consider.

I want to see this model after a very quick to move backwards against the resistance. Give it an added value if it is located just beside a trendline down. I like the first spark plug to be significantly smaller than the second.

Lately, it seems that this model becomes more reliable. I love how this model retains the other traders on the wrong side of a move. It is a clear indication that the bulls have lost control. I want to see a deep penetration in this first candle.

I don't think that chandeliers are the Holy Grail for stock trading. In fact, I think that they are virtually worthless without other factors on the table to save the implications of these.

Factors such as...

A movement against a strong downward trend.A multiple "up-to-date" resistance rally.

So, what are your favorite candle holders to trade on the short side? Those that you find yourself trading more often?

Apr 16, How to Short Stocks With Precision

How do you short stocks with better accuracy?

How can you pick out a of list of 10 stocks, which ones are the best stocks to short?

This is pretty simple. Use a combination of the daily and hourly charts with the 200 period moving average.

You can short stocks with better precision using the 200 period moving average on the hourly charts. You'll be stunned when you see how many times stocks reverse in this critical area on a stock chart!

Take a look at the following stock:

This stock has a classic head and shoulders pattern. But, the circled area is what we are concerned with. How would you be able to anticipate the impending drop? It's hard to tell on the daily chart. Now, look at the hourly chart:

This stock formed a double top right near the 200 period moving average (dotted line) on the hourly chart! This happens often because stocks tend to reverse near that 200 period moving average.

Here are five more examples of stocks reversing near the 200 period moving average on the hourly chart.

The best way to use this swing trading technique is to run a short scan of potential setups off of the daily chart. Move all of these stocks to a watch list and then go through the hourly charts of each stock. Which ones are rallying up against the 200 period moving average? Now look to the left on the stock chart. Is there a resistance area? If the answer is yes, then you definitely want to consider trading the stock.

This swing trading trick will improve your accuracy on short setups - even if you have never shorted a stock before!

Sep 9, How to Scan for Stocks Using StockCharts.com Technical Rank (SCTR)

AppId is over the quota
AppId is over the quota

How do you tell when the market will offer nice pullbacks or when it will trade off of momentum? The easiest way to check this is to look at the ADX indicator.

Readings below 25 indicate that the market will offer nice pullbacks to initiate swing trades. Readings above 25 indicate a strong trend - pullbacks will be shallow or nonexistent.

As long as the ADX indicator is above 25 and sloping up, the market will continue to trade off of momentum. Momentum is lost when it begins to slope down.

It's not a perfect technical indicator (none are) but it does a good job of telling you the current strength of the trend.

Not sure if you already know about this but EWI has their 2013 State of the Global Markets Report available. It's a worthy read - and it's free.

Download it here

I'm not sure how long it will be available so grab it while you can!

Take a look at the following chart:

H&R Block (HRB) recently broke out decisively (arrow) through resistance (highlighted). This stock is now in first pullback mode and could create a nice trading opportunity if it prints a reversal candle.

The one problem that I see is that this stock is in a mature trend which could lead to failure patterns.

Still, this is definitely one to keep an eye on when the market resumes trading.

I know from experience that a stock should move in your favor within a day or two after your entry. If it doesn't then it will likely go against you. Here is a recent trade that I had:

This stock pulled back and formed a bottoming tail and then an engulfing candlestick pattern. So I bought the stock. Then I waited...and waited...and the stock went nowhere. So I dumped it after a couple of days.

The first question that should come to your mind when this happens is:

Where are the buyers?

They aren't there.

Time to get out.

Aug 1, How to Find the Strongest Stocks to Trade

AppId is over the quota
AppId is over the quota

How do you tell when the market will offer nice pullbacks or when it will trade off of momentum? The easiest way to check this is to look at the ADX indicator.

Readings below 25 indicate that the market will offer nice pullbacks to initiate swing trades. Readings above 25 indicate a strong trend - pullbacks will be shallow or nonexistent.

As long as the ADX indicator is above 25 and sloping up, the market will continue to trade off of momentum. Momentum is lost when it begins to slope down.

It's not a perfect technical indicator (none are) but it does a good job of telling you the current strength of the trend.

Not sure if you already know about this but EWI has their 2013 State of the Global Markets Report available. It's a worthy read - and it's free.

Download it here

I'm not sure how long it will be available so grab it while you can!

Take a look at the following chart:

H&R Block (HRB) recently broke out decisively (arrow) through resistance (highlighted). This stock is now in first pullback mode and could create a nice trading opportunity if it prints a reversal candle.

The one problem that I see is that this stock is in a mature trend which could lead to failure patterns.

Still, this is definitely one to keep an eye on when the market resumes trading.

I know from experience that a stock should move in your favor within a day or two after your entry. If it doesn't then it will likely go against you. Here is a recent trade that I had:

This stock pulled back and formed a bottoming tail and then an engulfing candlestick pattern. So I bought the stock. Then I waited...and waited...and the stock went nowhere. So I dumped it after a couple of days.

The first question that should come to your mind when this happens is:

Where are the buyers?

They aren't there.

Time to get out.