After looking through my daily charts I found a perfect example of shorting a stock on lower lows. For the example I am using Holly Corporation (HOC) as it’s chart just today broke to lower lows after setting up a tiny base (the chart can also be found on sister blog Stock Charts to go).
(Extra Help: The concept for this is very simple as it using basic technical analysis on stock charts. If you need help understanding and reading stock charts than read the post here first, and if you want to refresh your skills take this quiz.)
All you need to take note of for this play is the last sevenish days of trading activity. You can how Holly Corporation (HOC) stock traded down to new lows at about $65 three days ago. The stock then rebounded up for two days than today fell once again. The short point for this simple play is when the stock crossed $65 (2nd black line) and hit new lower lows. A cover stop around $68 would be more than sufficient to protect yourself from losses. Initial target price would be the 200 day moving average (red line) at about $60.
The first black line is an earlier shorting position which integrates yesterday’s post of three shorting strategies using technical analysis.