Trade like an O’Neil Disciple. Gil Morales & Chris Kacher (II)

Another interesting concept of the book is about selling stock short.

They explain 5 rules:

-         Sell only when there is a clean bear market trend.

-         Sell "big Stock" leaders (2m shares daily) showing topping signs.

-         Sell 8-12 weeks after their peak following a major upside price run.

-         Ideal Stop loss are about 3-5 percent,

-         Profit targets are about 20-30%.

Moreover they recommend shorting rocket stocks. Hot stocks that move at least 4,5 times from their high-volume launch point in four weeks.

There are few opportunities in a year. The risk/reward is very favorable. You must short when stocks breaks below prior day's intraday low. You should cover at least half of position when the stock has declined 50%.