"Short" the wonderful company

[dimon]

Hey guys,

I wanted to ask you somehting...maybe someone tried that one before.

Did you think about "short" the company on the "sell" signals?

[hitone395]

Yep, did that in a simulated account. Made a ton of cash off Panera, Taser and Lowes. wonderful thing is you can be continually making money off the company.
I emailed Phil and asked him about doing that..Here is my email:

Let's say Company A is a wonderful company with a 50% MOS and all 3 tools say 'get in'. We do that and have a return of 20% in 4 month period. The technicals turn red, we get out and price drops.

At that point, instead of leaving it and finding another company, can we use the technicals to short stocks and make more money? Then when the position reverses, get in with a MOS and repeat.

His response:

"Definitely. Find a bad company at a horrible price. Just reverse the process. Then sell the stock instead of buying it. Then you buy it back when it goes down. This is done every day."

I like finding a wonderful company and buying when the big guys move and shorting when the big guys leave.

[Magg1e]

the MOS TEAM has even given us a few tools for that. they've included the % of float that has been sold short , giving us an indicator of where a likely short squeeze could occur.

a good example today - HOV . that sharp spike on a couple of soft news items shows a short squeeze in the works . 3 greens and the shorts were running for cover. so that info can be used a couple of different ways

[RonHaynes]

I would really like a better education on HOW to short stocks.
It makes sense, make money on the upswing, make it on the downswing.

It really could put a little "jingle" in your pocket if you think about it :)

[jmcanoy1860]

I agree completely. Shorting is an opportunity to make money. There is a much better way, in my opinion (and I'm not a professional by any means), than by relying on the technical indicators. (on a side note, has anyone noticed that all of the indicators are essentially either stretched out or flattened stock charts?!!)
Anyway, if you want to know how to short, you have to have to have good enough credit with a lender so that they will "lend you stock" at the market price. Then, you wait until the price drops, sell it, and return the stock to the lender.
I've found that shorting, especially these days, works well when you find a company who the analysts have recommended, which is a terrible value, and has no earnings, and preferably no dividends (just to make sure there's no carrot for people to hang onto). Even better is one with a market price near it's 52 week high and volatile. An example would be the dot com era. Obviously, in hind sight this is obvious. A slew of terrible companies with no earnings.
Another would be something recent, such as netsuite. I shorted that and made a profit of 30% before I chickened out.

By the way I "fake trade" on "theupdown.com" which gives you a fake lump of 1 mill dollars. As a disclaimer, since I love the ROIC I am not a professional nor am I associated with anything involving any real profit. Except my education......

Anyway, hopefully someone found something useful in my inexperienced ramblings
peace

[joshuat]

Originally Posted by Magg1e

the MOS TEAM has even given us a few tools for that. they've included the % of float that has been sold short , giving us an indicator of where a likely short squeeze could occur.

a good example today - HOV . that sharp spike on a couple of soft news items shows a short squeeze in the works . 3 greens and the shorts were running for cover. so that info can be used a couple of different ways

This is such a great post I felt compelled to quote it in its entirety. Please read this about 5 times until the full import sinks in.

"short squeeze" and "shorts were running for cover".

Yes, you can make a lot of money shorting. However, the most you can ever do is double your money, while your losses can truly be endless.

I'm not saying don't short, but I sure am saying that sooner or later you will be one of those shorts "running for cover". The market has an unlimited capacity for irrationality, and the worst stock at the highest price can keep climbing higher for far longer than you can hang on. If you can't do the risk calculation, I suggest you shouldn't be shorting. If you are shorting on the basis of technicals, well.... you are made of sterner stuff than I. :)

Shorting as a financial instrument is most often used to hedge positions, a perfectly rational use. A lot of that rests on the backs of individual investors, who are actually speculators, hoping for something good to come their way. It's a tough racket.

With all that said, The Value Investors Club seems to be a good source for short ideas. I choose to sit on the sidelines, however. I have a family to feed and house.