Kardec Trader breaks down a short-selling setup after a failed breakout in an uptrending stock. Watch for the 10 and 20 EMA, volume confirmation when the price violates the EMA, then wedging action with declining volume. Enter the short on the turn with a stop just above the day's high.
In terms of the short setup, what I'm looking for is you've got a stock in an uptrend and then it bases for a period of time. Let's just say this is your breakout level, it fails. And in the context of the moving averages, this is your 10 exponential, the green line is your 20-day exponential moving average. The other thing that I'm looking for is a violation of that 20-day exponential moving average, ideally on volume. So say like, you know, it's been trending, this is the volume signature, and then on the day it violates it, it's on larger volume. And what I would look for after that is what I would call wedging action. So what wedging is, is stock tries to recover, but then it's weak and it forms like sort of a wedge. So this is the daily chart. So like you can imagine, like this is a little bit of a wedge. As it wedges, I want to see volume also kind of be very minimal, which tells me that buying demand trying to push the stock higher is not there. I'm looking for the turn. So I'm shorting that turn lower and then setting my stop just right above that high of day.
