When Is It Time to Short a Stock?
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Editor’s note: When is it time to short a stock, asks Charles Delvalle. Check the dividends – if they’ve cut them down or cut them out, then get shorting…
These are the Perfect Companies to Short
Charles Delvalle
One of the simplest ways to make money in the stock market is to find a pattern with a history of repeating, and then exploit that pattern for profits. Today, I’d like to share with you a pattern that proves to be one of the best ways to make money in a down market.
All you have to do is look for companies that recently cut or eliminated their dividend payment, and short them.
The reason why stocks drop is straightforward.
Investors view a company’s dividend payment as a barometer of their fundamental health. If a dividend is reduced or eliminated, it’s almost always because the company is not only making less money, but should continue to make less money down the road.
Had you shorted Ford after they first cut their dividend payments in September of 2006, you’d be up 41%. You would have been up over 70% if you had shorted National City back in January when they cut their dividend. Clearly, this pattern has been happening for years.
So if you’re looking for a good company to short in this bear market, just look for one that recently cut its dividend payment.
Source: These are the Perfect Company’s to Short
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Tags: Charles Delvalle, US stocksAbout the Author
Charles Delvalle is a self-taught market-timing professional and value analyst who uses a combination of technical indicators and fundamental research to achieve consistent gains on stocks, commodities and options.
Charles is also a staunch contrarian and takes pride in finding undervalued sectors and discovering great companies on the cheap. He questions government reports and the status quo. In addition to swing trading options, Charles is also Co-Editor of the monthly advisory service - INCOME.
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