All financial instruments (without exception) that are truly bearish must form lower lows and lower highs. That is a market principle.
It is universal and applicable to all financial instruments. It is simple and clear. I like that. Consequently, one has a good excuse to sell if a financial instrument exhibits a lower high on the edge of a declining channel after a lower low. Pretty simple; isn't it? Not really.
One must learn to sell like a pro using a top-down trading method without ignoring both the fundamentals and economic news.
I will be writing an article about how to sell like a pro in a near future. Please stay tuned.
One can also sell if a company is in financial difficulties. Most of those companies will often fail the Google finance acid test. In those circumstances, one has a fundamental reason to sell, but one must always combine the fundamentals and technical analysis.
Indeed, a company that is not coping with the competition, losing market share and above all not making money (revenue going down year after year) is intrinsically bearish.WarningPlease, never sell a financial instrument just because of a technical or fundamentals reasons but both. Also stay tuned to the economic news.One can also be itching to sell a financial instrument that exhibits a lower high after a higher low. It is one of the most powerful reversal chart pattern. I like to call it a denial pattern. I love that pattern.One will also be ready to sell if the a financial instrument exhibits a lower high after a double top. Just be sure not to sell into a support level. Those who knows how to sell will be alright. One will adopt the same mindset after a lower high that appears after a head and shoulder chart pattern.Always use the bearish watchlist when the market SP 500 (major indices) is bearish.I mean buy another day. Look for an opportunity to sell when the market is bearish for short term gains.Try also to avoid fighting the market when the market is in a declining channel mainly on the monthly chart. It signals a bearish sentiment. It is time to concentrate on the bearish watchlist.A smart bearish trader is always very careful and prefers to stay way from a company that regularly pays juicy dividends. I am not saying that it is impossible to sell them but they can be hard to sell because the income investors will be loading it as a bear is trying to get some red juice (sell). Believe it not, few hedge funds went bust just doing exactly that mistake because they wrongly thought that with their big bank account they will force the stock down. Be aware of the income investors when selling for a medium term purposes. One can get away with it in the short term, but one does not want to hang around too long and get fried like the Kentucky fried chicken (KFC).Companies that do not pay dividend but accumulation large activities cost like precious metal and crude explorers are good bearish candidates when they become technically and fundamentally bearish.One can become a better short seller if one also masters chart patterns trading and candlestick patterns. I do not know why there are so many technical traders who never bother to master the candlestick pattern trading. I do not get it. Candlestick patterns do help.
Also, many traders thought they know everything about chart patterns but that is never true. One that is using candlestick and chart patterns must always check the financials and eco news. It is a mistake not to do so. It is still going on everyday though.
A bearish trader or investor love bearish financial market sectors. Well who can blame them. I will not. A quick Google and YouTube search for phrases such as
"Number one bearish sector this year xxxx"
"Bearish sectors this year xxxx"
"Financial market sectors that are bearish this year xxxx" will help one a bit to keep the ball rolling.
Obviously, one is more likely to find good bearish instruments in a bearish sector than a bullish instrument. At the same time one must be very careful and avoid selling oversold financial institutions in a bearish sector.
A bear should avoid selling financial instruments that are in a rising channel. It is always risky to sell in a rising channel.
As long as the price-action did not break below the rising channel, do not rush to sell because of the wave extensions.
Elliott wave traders love to punish those courageous bears that are selling during the Elliott wave extensions. Be aware of the fifth wave extensions. Another dangerous wave extension is the fifth minor wave extensions of the fifth wave itself. May God have mercy on those who do not bother to master the Elliott wave trading.
I mean it 100%. It is not too late to begin to learn it. I did the same thing in the past. Am I barking too much? I hope not.
