We have started to see some major distribution in the stock market the past couple months. There are several major signs signaling that a bear market is coming next year. Knowing proven short selling strategies will be imperative for profitable trading in 2019.
Today we are going to give you some of the best short selling setups we use on almost a daily basis when the market gets weak. Here are the 4 short selling strategies we use, and videos about how you can trade them. There’s also real trade examples that show you directly how to apply them.
Earnings Breakdowns
In a bear market there will be a lot of negative reaction to earnings. Even when earnings reports are good, a stock will still often fade off in a bear market. Earnings breakdowns are one of my favorite setups, since they have such a strong negative catalyst behind it. Here’s how you trade earnings breakdowns:
The 2nd Day Continuation Short
In a bear market, downside momentum will often continue for consecutive days. The day after a big move to the downside in a stock will sometimes see great follow through as the trend continues. Here’s how you trade 2nd day continuation plays:
The End of Day Fade
Sometimes stocks will take a while to make their move to the downside. They will consolidate all day, and then at around 2-3PM start to break support and fade hard. This is a great late day setup to use in a bear market. Stocks tend show strong weakness towards the end of day as traders get margin calls during this time of day and get forced out of their positions. Here’s how you trade the EOD fade:
VWAP Fade
Stocks will often pop and retrace after a strong move to the downside. Often downtrending stocks intraday will pullback to their VWAP (volume-weighted price average), and then continue their downtrend after testing the VWAP. Shorting a pullback towards VWAP is a great strategy when stocks are in a downtrend:
Bonus Setup: Trading Inverse ETFs
If you are not comfortable shorting, there is actually ways to make money to the longside while the overall market is going down. You can do this through buying inverse ETFs, like TVIX, UVXY, and VXX. Here’s a video going into more depth on this topic, and using a trade example with TVIX:
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