Wednesday, March 8, 2017

How to Find the Best Short Setups

Hey folks,

I wanted to do a blog post on how I scan for the best possible short setups.
As you all know, we have been in a strong bullish market, so finding short setups is not my primary objective as I want to trade with the UPTREND, not against it.
However, there will be times when SHORTING makes sense especially after a big market run up that appears to be stalling(tiring out), and many stocks start to pull back or even breakdown as indices rest, chop or correct to undo the "over-bought" conditions.

Last night for  ART OF TRADING members, I sent out this short setup in CRC and it was actually the 'AoT TOP PICK' for today, or basically my favorite trade idea for the day.

CRC short was good for +14% gain in ONE DAY for AoT members who took the trade!!

So today, I wanted to do a "Step By Step" educational blog post on 'HOW and WHY' I liked CRC on short side so hopefully you can learn to spot these sorts of awesome bearish patterns in YOUR trading routine!

Here's how I found the CRC setup .....

First thing I look for when I take a Short Setup(or even a long setup for that matter) is SECTOR confirmation! I want to see that the ENTIRE sector is moving in the same direction, whether that be UP or DOWN. Trading with the sector's direction increases your chances of winning much more.
So always be aware of what the overall sector is doing before looking for setups.
In CRC's case, the overall energy sector has been in a downtrend last few weeks so trading it from short side made sense to me.

Here's the XLE chart..... as you can clearly see, XLE and energy stocks in general have under performed big time versus the S&P500. So the sector has strong "Relative Weakness" which makes for good short setups.

 Once I determined that the market was acting choppy and potentially even toppy as more and more started to get distributions days and trade down hard on big volume, I started to scan in the energy sector using my, similar to this one here: Finviz scans

Then I found this CRC which caught my eye... See chart below for full details....

This was the actual CRC short setup sent to ART OF TRADING members ....

... and here's how that CRC short looked today!  Down 14% in one day!

Hope you found this post helpful!

Wish you all happy trading!

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