TAILIEUCHUNG - Secrets for profiting in bull and bear markets Chapter 7

Chapter 7 Selling short: The less traveled road to profits. Although the market for stock is upwardly biased when view over long periods, a good one third of the time it's headed down | CHAPTER 7 Selling Short The Less Traveled Road to Profits Although the market for stocks is upwardly biased when viewed over long periods a good one-third of the time it s headed down. This also applies to individual stocks. Most investors view this downward phase as a time to be out of the market or out of particular stocks. They content themselves during this time with the paltry return offered by banks and money market funds awaiting the end of the so-called bad market. Individual investors aren t the only ones who spend long periods sitting on their hands. Their brokers are no better -just more dangerous. They fill their days and earn their commissions during down markets by recommending buys on fallen stocks stocks that usually still have a good distance yet to decline. This chapter is one of the most important in the entire book. It s about short selling. Read it carefully and with an open mind. If you re unfamiliar with the concept of short selling go back to the definitions on short selling and breakdowns in Chapter 1. It never ceases to amaze me how many market players refuse to sell short Many won t give it a moment s thought. They would no more short a stock than put the deed to their houses on double zero in a Vegas casino they view it as being that risky. Therefore it s understandable why they react so negatively when the subject is broached. But those fears are unfounded and they are actually losing out on a chance to make a great amount of money in a hurry. It s a statistical fact that stocks decline faster than they rise. So if you learn how to capitalize on these smashes you ll be way ahead of the game. 215 216 Chapter 7 CHART 7-1 COURTESY OF MANSFIELD STOCK CHARTS Stocks fall apart much faster than they rise because fear causes a panic reaction while greed takes a while to simmer. These two vulnerable charts 7-1 and 7-2 were recommended as short sales in The Professional Tape Reader. They clearly show the profitable chemistry that occurs when you

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