In both rising and falling markets stocks can become targets for shorting as a result of market trends. Shorting is always a stronger strategy during a bear phase, but many short plays work extremely well in bull markets. In fact, some shorting opportunities don’t even arise in bear markets because many shortable market trends are the after-effects of buyable market trends.

Examples of this are the reliable market trends of weak stocks falling after they have run up on moderate news. Let’s say the biotech sector has been hot during the last couple of weeks. Then a small pharmaceutical firm puts out a news release that its new drug has passed its trials and will soon go to market. The market’s perception of the news is extremely positive, and the stock rises 30% in two days. Your analysis says that the price won’t hold at that level. So you wait for what you believe will be the stock’s final push upward, short it near the top, set stops to protect yourself, and wait for the stock to fall.

Stocks like this that rise on news can be traded during both parts of their journey; long on the way up, and short on the way down. They’re ideal for trading because once you’ve watched a few similar situations; you’ll get an idea of just how far the market trends are willing to push them up.

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