OptionMillionaires

Friday, July 30, 2010

When To Buy & When To Short Sell

Posted by Timothy Sykes on Wed 28th of Jul, 2010 08:14:46 PM

Ok, Ok, you don’t want to read 3,000 blog posts, let alone 150, so I’m going to try to condense 11 years of trading into some simple but powerful rules:



When To Buy A Stock:
-It is breaking out to new highs on strong volume
-The breakout coincides with important news: great earnings, a new product launch, a contract win, FDA approval, etc.
-A breakout in the afternoon above morning highs and ideally some mid-day consolidation
-The stock closes that day of the breakout strongly not weakly

When To Short Sell A Stock:
-The stock is up far too much too quickly and now the volume and chart pattern have begun fading
-The catalyst for the up move is not fundamentally sound, ie: newsletter mentions, momentum trader buying
-The stock has broken a key technical level on both an intraday and multi-day basis
-Early short sellers have already been squeezed on past spikes

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