For stocks to go up, they need buying, or “accumulation.”
“Distribution” is the opposite of accumulation.
It means stocks are going down on above-average volume.
And that is exactly what we have seen during eight of the last 10 trading days (see chart below).
This should be a big red flag for investors.
It means the big money is still selling.
It also means that stocks are likely to continue lower…
As 80% of stocks typically follow the direction of the general market.
So, buying under these conditions is asking for trouble.
Even the best stock pickers will lose on four out of five trades in a bear market.
If you need more proof, just take a look at this chart.
It tells you everything you need to know about the stock market right now.
So, what can you do in a market like this?
Well, first… Don’t fight the trend.
If you want to trade in a market like this, use any short-term rallies to find good places to sell stocks short.
A Prime Short Candidate
For example, check out this short idea on Signet Jewelers Limited (SIG), the jewelry and luxury goods retailer.
I want to sell SIG short in the $75-$80 area.
Why? Several reasons…
First, SIG broke its 200-day moving average (rising white line) last month, putting it in a confirmed downtrend.
The stock has also been unable to get back above its 50-day average (falling red line).
Both of these moving averages are near the $80 mark, and a re-test of that level is likely to fail.
In other words, if price rises to that area, the moving averages are likely to act as resistance and send the stock lower again.
That would also coincide with the down trending resistance line (falling white line) in the same area.
That’s a lot of resistance at one point in an ugly bear market.
And just like we look for stocks to rise off of support, we want to look for stocks to fall from resistance.
That’s where you want to sell short.
I’ll keep you updated on this trade idea as it progresses, so stay tuned.
Embrace the surge,
Editor, Stock Surge Daily