1) Short on a parabolic move
One of the best formations with the very great percentage of risk-reward. If you see that the stock continues to rise in value without any significant decrease in price, you might want to start opening a short position. When the wash occurs, and in most cases it does, then don’t forget to close parts of your position with each meaningful decrease.
2) Shorting lower-high
When you see that each high price is lower that the previous high price, then it means that the stock will probably continue to fall.
3) Short the Gap
If the company issued some important news about its business, its stock will probably go one away or another on the afterhours or premarket. If you understand the news and think that the market understanding of those news is wrong and the gap that was created during non-market hours is meaningless, then you should think of opening a short position and risk management it carefully.
4) Shorting the fake figure
In a lot of cases, when the stock breaks whole numbers or prices like 5.50, 5.80 etc. and cannot go above, it means that the fall of that stock is about to begin.
5) Afternoon fade
Sometimes the stock might be not very volatile at the open and can continue to trade passively for the first half of the day. However, in the second half of the day, activity might come by and the stock will begin to wash away. So don’t forget that the second part of the day is as important as the first one.
6) Green to red
In this case, the buyers of the stock failed to push it higher and that stock reversed and started to fall apart for the rest of the day.
7) Short the Gap
If the company issued some important news about its business, its stock will probably go one away or another on the afterhours or premarket. If you understand the news and think that the market understanding of those news is wrong and the gap that was created during non-market hours is meaningless, then you should think of opening a short position and risk management it carefully.
8) Triangle or ABCD
Triangle is the most standard formation for going long. When a lot of buyers are keep purchasing the stock, then in one moment it will go up momentarily and wipe out the short sellers that were betting against such a move.
9) Higher-low
It’s a reversed Lower-high. If each lower price if higher than the previous one, the the stock will probably continue to grow until it breaks such a pattern.
10) Breakout
Breakout occurs when the gap between buyers and sellers narrows and one side prevails the other. In our case, buyers outsmarted sellers.
Hope this one was helpful. The material is brought to you by proprietary trading firm Arbitrage Trades.