High-Profile Momentum Stocks

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Be very careful about trying to short stocks that are on everybody's

buy list. How many times have you heard someone say, "If Intel or

Microsoft go down, I'm going to buy some." You go short at the

exact time when the stock is considered by many to be a good buy.

Caught in a short-term rally, you have to cover your short position,

which only adds to the rally. For the most part, you should avoid

shorting stocks like this unless you have an excellent understanding

of the specific stock's support and resistance areas as well as its

normal volatility.

If you are shorting using ECNs (Electronic Communications

Networks), you will still need to know the stock's support and resistance

levels. As with all buy and sell decisions, you will use technical

indicators and technical analysis. Because electronic traders

usually sell a stock short for only a few minutes or hours, fundamental

factors will only help you identify a stock that should begin

or stay in a bearish trend.

Be very careful about trying to short stocks that are on everybody's

buy list. How many times have you heard someone say, "If Intel or

Microsoft go down, I'm going to buy some." You go short at the

exact time when the stock is considered by many to be a good buy.

Caught in a short-term rally, you have to cover your short position,

which only adds to the rally. For the most part, you should avoid

shorting stocks like this unless you have an excellent understanding

of the specific stock's support and resistance areas as well as its

normal volatility.

If you are shorting using ECNs (Electronic Communications

Networks), you will still need to know the stock's support and resistance

levels. As with all buy and sell decisions, you will use technical

indicators and technical analysis. Because electronic traders

usually sell a stock short for only a few minutes or hours, fundamental

factors will only help you identify a stock that should begin

or stay in a bearish trend.