Shorting a Winner

It amazes me that 0.5% or even a 0.25% feels like a sharp market selloff. I know I'm not alone in this feeling, which just demonstrates how strong this market has been as of late. Or perhaps it speaks to how small pullbacks have been when we have seen them. This might be a good situation to look for a recent winner to grab a starter short position and find a loser to put on the watch list for a long entry.

I mentioned 3M (MMM) as a possible short candidate and while the stock has continued to climb, I think the short-entry opportunity has arrived. The bearish divergence on the RSI grows, which will matter at some point. Furthermore, a rising wedge, which I view as bearish, has developed within this trend higher. At the very least, MMM looks poised to pull back to $104 or possibly $102. Ideally, I'd like to see the stochastics roll over, but with the TRIX already stalling, the bearish divergence on the RSI and the rising wedge pattern, I will start building a short position via long April $105 puts at $1.75....203 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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