In my April 20th, 2015 article What Might September Bring?, I referred to a key tip about shorting stocks in William J. O’Neil’s book How to Make Money Selling Stocks Short.
Referring to the timing of short sales on individual stocks, his statement was “…the optimal shorting point will, in the majority of cases, present itself five to seven months or more after the absolute peak in the stock.“
Many of the examples in the book show stocks that initially sold off, but within 5 to 7 months returned to key moving averages or areas that had been support. If they started selling off from that re-test, a higher probability short trade would usually present itself.
Actually, a few days after I wrote that article, Apple stock (AAPL) set what turned out to be an absolute peak on April 28th, 2015. It tried to break to new highs in mid-July, but failed. The stock sold off sharply in late August, following the general market.
Then along with the general market rebound in October, AAPL regained some of its losses. Matching Mr. O'Neil's research, the stock made it back to a key moving average, the 200-day MA, about 6 months after the April peak. This proved to be a good point to short the stock (or take bearish option positions), because from that re-test of the 200-day MA, AAPL has since dropped 25%.
That inability of AAPL to work to new highs in June caused me to write an article on July 6th called Will You Be The Last Buyer?, focusing on Apple Inc (AAPL) and Facebook Inc (FB). I pointed out how volume had steadily fallen off in both stocks as they set recent highs. My article ended saying ‘Before you click the ‘buy’ button on a new addition to your portfolio, look for evidence that you might be one of the last buyers for that stock.'
So, were you the last buyer of AAPL back in July, or were you looking for a re-test of previous support or a key moving average in the 5 to 7 month period after the April high in order to short the stock?
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, please click on the following link: www.markettamer.com/seasonal
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Gregg Harris is the Chief Technical Strategist at MarketTamer.com.
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