Is NGPS a Short Candidate?

…I was asked if NGPS had become short sale because it had reached overbought levels in the past month. As we can all see, NGPS was down 36.49% on the largest weekly volume of all time. This does not mean we sell our shares and immediately short the stock. Why?

A stock, in my view, is never a short sell until is below the 50-day moving average (at least) and even more so when it drops below the 200-day moving average. The first break below the 50-day is still not the ideal time to short a stock. The stock must try to break back above this line and fail one or two times. At this point, based on charts, an ideal short position can be opened.

I will look in my files for a short sell chart that I have used in the past. I will also look for a current short sell chart pattern in today’s market. I will post a case study this weekend highlighting the characteristics of a prime short candidate.

As for NGPS, it's still above the 50 and 200 day moving averages. A stock does not automatically become a short sell because it becomes overbought. This is a very common misconception to most investors.

I don't recommend shorting stocks until you have mastered years of making profits buying and selling regular positions. It's hard enough to do just that consistently.

Piranha