Investology

Picking Stocks For Short Selling

When you try to engage in a short sale, it is important to monitor and track the market on a regular basis. Studying current stock market charts very carefully is also essential. Monitoring market trends is also important since it can help determine a potential down trend that makes short selling viable.

Look For Weak Stocks

In short selling, it is important also to be able to identify weak stocks. They are the basis on why short selling exists. One of the characteristics of weak stocks is the constant selling pressure from current investors. There can be a number of reasons for this. That is why it is also essential to analyze the reasons behind why the stock is being considered weak with its stock price falling despite being well-known.

Bad News For Companies, Good News For Short Selling

In the case of short selling, bad news regarding companies in the stock market may be considered as a potential short selling candidate. Many stock traders consider upcoming bad or negative news about a certain company as a signal that its stock is a potential candidate to short sell.

Huge Rallies In The Market

Being aware of stocks experiencing huge price rallies may also be a potential for short selling. Certain huge rallies in stock prices have the tendency to crash afterwards, especially if they happen without any credible reason behind them. It may be a case of herd mentality among investors without a lot of basis apart from rumors and small talk. Such instances might make such stocks ripe for short selling.

Tags: short selling