9/22/2006

Markets under pressure

Markets will continue to be under pressure. I am expecting a nasty correction before the market again stabilises. Not all stocks and all sectors will be equally impacted by the correction.

Finding short candidate is never an easy exercise, but if you anticipate correctly probably there are some good short set ups. The problem with shorts always is availability and high volatility. It is easy to find short opportunities for few dollar kind of move, but if you are looking for 10 dollar plus kind of moves then it requires lot of patience and systematic approach.

Earning slow down and miss can sometime get you good short candidates if they happen at top of the range. Recent examples of these are CHS and JOYG. When a stock tops out it does not necessarily start going down immediately, most of the time it spends considerable amount of time going sideways sometimes for years before it starts sliding down.When I hear use exactly opposite of what you do for longs on shorts, I am always skeptical. It simply does not work that way.

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