{"id":10438,"date":"2022-03-20T13:56:24","date_gmt":"2022-03-20T17:56:24","guid":{"rendered":"https:\/\/morpheustrading.com\/blog\/?p=10438"},"modified":"2023-01-27T11:00:13","modified_gmt":"2023-01-27T16:00:13","slug":"ledge-breakdown-short","status":"publish","type":"post","link":"https:\/\/morpheustrading.com\/blog\/ledge-breakdown-short\/","title":{"rendered":"Short Selling Strategy: How We Made a +16% Gain in 2 Days with $AMC"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/short-header.jpeg\" alt=\"selling short header image\" width=\"720\" height=\"432\" title=\"\"><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">TABLE OF CONTENTS<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/morpheustrading.com\/blog\/ledge-breakdown-short\/#Discover_how_to_profit_from_current_stock_market_weakness_by_short_selling_with_the_Ledge_Breakdown_pattern_Heres_a_simple_walk-through_of_how_it_works\" >Discover how to profit from current stock market weakness by short selling with the Ledge Breakdown pattern. Here&#8217;s a simple walk-through of how it works.<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/morpheustrading.com\/blog\/ledge-breakdown-short\/#Following_the_Trend\" >Following the Trend<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/morpheustrading.com\/blog\/ledge-breakdown-short\/#Short_Setup_Ledge_Breakdown\" >Short Setup: Ledge Breakdown<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/morpheustrading.com\/blog\/ledge-breakdown-short\/#How_to_Identify_the_Ledge_Breakdown_Short_Setup\" >How to Identify the Ledge Breakdown Short Setup<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/morpheustrading.com\/blog\/ledge-breakdown-short\/#Ledge_Breakdown_Checklist_for_AMC\" >Ledge Breakdown Checklist for $AMC<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/morpheustrading.com\/blog\/ledge-breakdown-short\/#Trade_Management\" >Trade Management<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/morpheustrading.com\/blog\/ledge-breakdown-short\/#Master_Your_Short_Selling_Game\" >Master Your Short Selling Game!<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/morpheustrading.com\/blog\/ledge-breakdown-short\/#Winning_Short_Selling_Strategies\" >Winning Short Selling Strategies<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/morpheustrading.com\/blog\/ledge-breakdown-short\/#Tuesday_March_22_at_1_00_PM_ET_UTC-4\" >Tuesday, March 22 at 1:00 PM ET (UTC-4)<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Discover_how_to_profit_from_current_stock_market_weakness_by_short_selling_with_the_Ledge_Breakdown_pattern_Heres_a_simple_walk-through_of_how_it_works\"><\/span>Discover how to profit from current stock market weakness by short selling with the Ledge Breakdown pattern. Here&#8217;s a simple walk-through of how it works.<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em>[Editor&#8217;s Note: If you like this article and would like to learn more about our winning short selling system, then be sure to join our live Morpheus Academy <a href=\"https:\/\/new.morpheustrading.com\/blog\/morpheus-academy-short-selling\/\" target=\"_blank\" rel=\"noreferrer noopener\">class<\/a> on Tuesday, March 22 at 1:00 PM ET.]<\/em><\/p>\n\n\n\n<p>Last week&#8217;s Fed decision on interest rates sparked a significant, 4-day rally off the lows in the main stock market indexes.<\/p>\n\n\n\n<p>After weeks of steady losses, the bounce certainly gave a welcome reprieve to nervous investors.<\/p>\n\n\n\n<p>However, both the Nasdaq Composite and Nasdaq 100 indices have now bounced into key overhead resistance of their 50-day moving averages.&nbsp;<\/p>\n\n\n\n<p>On the daily chart of the Nasdaq 100 Index below, notice this is the <strong>first touch of the 50-day MA resistance since the downtrend began<\/strong> in January.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full is-resized is-style-default\"><a href=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/NDX-daily_50.png\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/NDX-daily_50.png\" alt=\"Nasdaq 100 chart\" class=\"wp-image-10444\" width=\"713\" height=\"389\" title=\"\"><\/a><figcaption class=\"wp-element-caption\"><em>Press chart to view full-sized image<\/em><\/figcaption><\/figure>\n\n\n\n<p>In an <em>uptrending<\/em> market, a pullback to 50-day MA support is often a low-risk buy signal in anticipation of an uptrend resumption.<\/p>\n\n\n\n<p>Conversely, in a <em>downtrending<\/em> market, <strong>a<\/strong> <strong>rally into overhead resistance of the 50-day MA can provide a low-risk SHORT entry<\/strong> <strong>point<\/strong>&#8212;<em>especially<\/em> <em>on the first touch <\/em>of the 50-MA within a downtrend.<\/p>\n\n\n\n<p>However, it&#8217;s imperative to first have a <strong>rule-based system to find the proper, low-risk short entry points <\/strong>with positive risk-reward ratios.<\/p>\n\n\n\n<p><em>Continue reading<\/em> to discover one of the top short selling setups we regularly scan for in our nightly <a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Morpheus stock report<\/strong><\/a> to provide members with winning stock trades on the short side.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Following_the_Trend\"><\/span>Following the Trend<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As trend traders, we only focus on buying stocks (going long) in uptrending markets.<\/p>\n\n\n\n<p>In a bullish market, the <a href=\"https:\/\/morpheustrading.com\/best-swing-trading-strategy\" target=\"_blank\" rel=\"noopener\">Morpheus Trading system<\/a> focuses on buying explosive, high-flying growth or momentum stocks trading near 52-week highs.<\/p>\n\n\n\n<p>But we shift our focus to selling short when conditions turn sour and the major indices begin trading <em>below<\/em> their 50-day moving averages.<\/p>\n\n\n\n<p>This simple trend trading methodology always puts the odds of a winning trade in our favor&#8211;<em>regardless of market conditions.<\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Short_Setup_Ledge_Breakdown\"><\/span>Short Setup: Ledge Breakdown<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Last month, we showed you a&nbsp;<a href=\"https:\/\/new.morpheustrading.com\/blog\/fb-swing-short\/\" target=\"_blank\" rel=\"noopener\"><em>Simple Strategy to Profit from Short Selling a Weak Market<\/em><\/a> here on the blog.<\/p>\n\n\n\n<p>That article walked you through how we <strong>sold short $FB for a quick +10% gain in six days <\/strong>using the basic Morpheus &#8220;Short the Bounce&#8221; technique.<\/p>\n\n\n\n<p>Today, we introduce you to a different type of short setup known as the &#8220;Ledge Breakdown.&#8221;<\/p>\n\n\n\n<p>The general concept of the <em>Ledge Breakdown<\/em> is to <strong>identify and sell short stocks in a strong downtrend after a few weeks of choppy, sideways price action. <\/strong><\/p>\n\n\n\n<p>Such &#8220;chop&#8221; is just basing action at the lows, which we call a <em>ledge.<\/em><\/p>\n\n\n\n<p>Here&#8217;s how it works&#8230;<\/p>\n\n\n\n<p><iframe loading=\"lazy\" width=\"580\" height=\"680\" src=\"https:\/\/4966a6ff.sibforms.com\/serve\/MUIFAOyl4S5Qdajs7q3LemJKudDbMHB24p2SAorKuWWuauy3e1eFPtLgTh5BoPCh3XzIz3rZE_YyIqvc9IEl_xMkRg3MTlG0Zn5eqY3J2eKMjOE-jPuS43ZXewKssUaGt1kllR56wV2u1lBXoYfKSzEgeeTjLyjdSao87VmqsbDtgcy4jNwHMSzf0Rl346rIoBjtZwf-DX0V6tbn\" frameborder=\"0\" scrolling=\"auto\" allowfullscreen style=\"display: block;margin-left: auto;margin-right: auto;max-width: 100%;\"><\/iframe><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_Identify_the_Ledge_Breakdown_Short_Setup\"><\/span>How to Identify the Ledge Breakdown Short Setup<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In order to consider short entry based on the Ledge Breakdown pattern, the stock must first meet the following five criteria:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Stock must be in a strong downtrend,<\/strong> after breaking down below a major support level. This means moving averages should be stacked to the downside: 20-day MA below the 50-day MA, and 50-day MA below the 200-day MA. <br \/><\/li>\n\n\n\n<li>After a significant selloff,<strong> the price chops around for several weeks to form a &#8220;ledge.&#8221; <\/strong>The high of the ledge (base) should be at, or just above, the 20-day EMA, but below the declining 10-week MA (on weekly chart). <br \/><\/li>\n\n\n\n<li>After a few weeks of chop, the<strong> 8-day and 20-day exponential moving averages converge together<\/strong>, which makes the break of support more significant. Note the 10-day EMA can be used in place of the 8-day EMA.<br \/><\/li>\n\n\n\n<li>Wait for the <strong>formation of a tight-ranged inside day<\/strong>, at or near the 20-day EMA, as a low-risk entry point. This day becomes the trigger for a short entry.<br \/><\/li>\n\n\n\n<li>The actual <strong>short entry point is when the price breaks below the low of the tight-ranged day<\/strong>. A firm stop is placed neatly above the same day&#8217;s high (or two-day high if it isn&#8217;t much higher).<\/li>\n<\/ol>\n\n\n\n<p>Members of <em><strong><a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\">The Wagner Daily<\/a><\/strong><\/em> recently scored a +16% gain by following our trade alert for Ledge Breakdown short entry into AMC Entertainment ($AMC).<\/p>\n\n\n\n<p>The daily chart of $AMC below reviews the original setup and winning result:<\/p>\n\n\n\n<figure class=\"wp-block-image is-resized\"><a href=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/220316AMC.png\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/220316AMC.png\" alt=\"$AMC daily \" width=\"713\" height=\"541\" title=\"\"><\/a><figcaption class=\"wp-element-caption\"><em>Press chart to view full-sized image<\/em><\/figcaption><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Ledge_Breakdown_Checklist_for_AMC\"><\/span>Ledge Breakdown Checklist for $AMC<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Let&#8217;s review how the $AMC setup met each of our five criteria for short entry with the Ledge Breakdown setup (reference the prior list above the chart):<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>$AMC cracked support at $30, then dropped 40% more over a few months before basing at $15.<\/li>\n\n\n\n<li>$AMC paused for several weeks after finding support at $15, with the ledge high above the 20-day EMA, but below the declining 10-week MA.<\/li>\n\n\n\n<li>The 8-day and 20-day EMAs converged to pinch together after several weeks of chop.<\/li>\n\n\n\n<li>$AMC formed a tight-ranged <a href=\"https:\/\/www.investopedia.com\/terms\/i\/inside_day.asp#:~:text=An%20inside%20day%20is%20a,is%20higher%20than%20the%20first.\" target=\"_blank\" rel=\"noreferrer noopener\">inside day<\/a> on March 3, right at convergence of its 8 and 20-day EMAs. <em>This was our short signal.<\/em><\/li>\n\n\n\n<li>$AMC triggered for short entry on March 4, immediately after the price broke down below the prior day&#8217;s low.<\/li>\n<\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Trade_Management\"><\/span>Trade Management<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>With all types of short setups, we aim to quickly lock in profits on <em>partial<\/em> position size, then hold the remaining shares in anticipation of further gains on the short side.<\/p>\n\n\n\n<p>After selling short $AMC beneath the March 3 low, we covered <em>half<\/em> of the position for a quick +8% gain just two days later.<\/p>\n\n\n\n<p>We then alerted subscribers of our <a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>stock trading report<\/strong><\/a> that we were covering the remaining shares for a +16% gain on March 8 (as the price undercut support t $15).<\/p>\n\n\n\n<p>We are typically quicker and more aggressive with taking profits in short positions versus long.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Master_Your_Short_Selling_Game\"><\/span>Master Your Short Selling Game!<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Despite the recent bounce in the stock market, the major indices still remain in strong downtrends.<\/p>\n\n\n\n<p>Consistently making money in this type of weak market may only be possible with an <em>effective, proven short selling strategy.<\/em><\/p>\n\n\n\n<p>If you&#8217;re serious about profiting in a downtrending market like the present, be sure to attend our upcoming, <em>live<\/em> Morpheus Academy class:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Winning_Short_Selling_Strategies\"><\/span><em><a href=\"https:\/\/new.morpheustrading.com\/blog\/morpheus-academy-short-selling\/\" target=\"_blank\" rel=\"noreferrer noopener\">Winning Short Selling Strategies<\/a><\/em><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Tuesday_March_22_at_1_00_PM_ET_UTC-4\"><\/span>Tuesday, March 22 at 1:00 PM ET (UTC-4)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Press <a href=\"https:\/\/new.morpheustrading.com\/blog\/morpheus-academy-short-selling\/\" target=\"_blank\" rel=\"noreferrer noopener\">HERE<\/a> for class details and registration link (registration is limited and available on a first come, first served basis).<\/p>\n\n\n\n<p> <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Discover how to profit from current stock market weakness by short selling with the Ledge Breakdown pattern. Here&#8217;s a simple walk-through of how it works. [Editor&#8217;s Note: If you like this article and would like to learn more about our winning short selling system, then be sure to join our live Morpheus Academy class on [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[3],"tags":[],"class_list":["post-10438","post","type-post","status-publish","format-standard","hentry","category-stock-trading-strategy"],"_links":{"self":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/10438","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/comments?post=10438"}],"version-history":[{"count":18,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/10438\/revisions"}],"predecessor-version":[{"id":15776,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/10438\/revisions\/15776"}],"wp:attachment":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/media?parent=10438"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/categories?post=10438"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/tags?post=10438"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}