shorting: was RE: [CANSLIM] COCO

From: James Bond <james_bond_3rd@yahoo.com>
Subject: shorting: was RE: [CANSLIM] COCO
Date: Sat, 21 Sep 2002 19:19:04 -0700 (PDT)

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It's interesting that a group focusing on the
relatively conservative method of CANSLIM has started
to discuss short strategies. Is it a sign that we're
close to a bottom?

My 2 cents on shorting: 1. Shorting is hard; 2.
Shorting is harder in the third year of a bear market;
3. Shorting is even harder when short interest is
approaching the highest level in 5 years. I have
shorted a few stocks with some success last year. This
year I had much less success and was so frustrated I
have not shorted anything since June.

Yes, the inverse of CANSLIM would be a good starting
point for considering a short - but only a starting
point. A successful short requires perfect timing,
because the stock market is designed against short
sellers. Not only one needs to catch the correct entry
point, it also has to be entered during an uptick. The
problem is, using the inverse CANSLIM type pivot point
will never allow an entry because stocks will crash
through the "pivot point" without generating an
uptick. And those do generate upticks close to ideal
entry points are usually the wrong stocks to short.

For me, best short candidates are very different than
the reverse of long candidates. The safest shorts are
the climax runs (I haven't seen these in a long time).
In those cases the day of the top usually jumps out in
the chart. The reverse situation, a climax selloff
bottom, is very very hard to determine. The second
safest shorts are failed breakouts. These are not
inverted CwH's but the normal CwH's with broken
handles or failed to hold new highs after BO. Shorting
off continuation patterns such as inverted CwH
patterns requires a lot of skill.

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