EarningsBeats.com Digest for January 21, 2022
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If You Decide To Short Stocks, The Same Rules Apply
I don't do anything different if I short a stock vs. trading it on the long side. I guess you could say I simply turn the chart upside down. Instead of trying to buy a stock at key support like the 20-day EMA on a pullback, I would now begin to look for the opposite - short-term strength to test the 20-day EMA from underneath. You want to
try to time the short entry as close to key resistance as possible. That way, if the trade goes against you, the risk isn't too great. For an example, consider SAIA, Inc. (SAIA):
After gapping up in late October, SAIA established both gap and price support in the 290-300 range. So when price broke down beneath that support range (green-shaded area) earlier in January, it established the key resistance range to now be that 290-300 area. On Thursday, SAIA tested its now-declining 20-day EMA and that also happened to fall in that 290-300 area. In my view, that's the best time to short a stock. We're never guaranteed
that it'll roll over, but if it doesn't, we can exit quickly on the breakout above this trading range and 20-day EMA. If it fails, however, we could see SAIA quickly back to its recent low near 265.
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Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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