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| How do you sell short if you avoid chasing downside momentum? Just like your long positions, enter short sales on pullbacks (bear rallies) to reduce risk and increase potential reward. The skilled trader also sells into the end of a short squeeze, just when buying power fades. One important squeeze characteristic dictates that covering shorts cannot force a 100% retracement of the last downward thrust all by themselves. It takes real buyers to do that. Squeezes should fail no higher than 62% of the prior decline unless new longs emerge. Follow pullbacks to major resistance and watch for a possible top that aligns to 50% or 62% of the prior rally. Enter when a topping pattern in the next lower time frame confirms the reversal. These elevated levels have another advantage to the short seller: you never have to worry about finding an uptick. |
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