From Trading Markets — three ways to short a stock: Take a position based on fundamentals as though it were long term. Wall Street seems to want to believe the best in companies, and its pundits often pooh-pooh less-than-stellar stock performance as temporary. Get in while everyone else is rooting for a recovery. Don’t get sucked into "trade-only" plays. Never go against fundamentals. The discipline needed for long side investments is equally vital on the short side. In the same vein, you may be tempted to head for the hills at the first sign of good news for a shorted stock. But if you based your trade on crumbling fundamentals, you have to tell yourself that "this, too, shall pass" when a bad stock is caught in a temporary updraft. Sticking to fundamentals gives you confidence in the logic of a position and enables you to wait out market volatility. Look for a perfect storm. There are many reasons to short a stock. If you wouldn’t be caught dead owning the shares, that’s a pretty ...
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