All three shorts are sporting open profits. Being 3 for 3 is much better than the odds suggested by backtesting MACD/H negative divergences. Having just recorded a video about shorting on MACD divergences for The Truth About MACD series, I’m very much aware that its too early to declare victory on these trades.
I did try to increase the odds by only shorting a negative MACD divergence when I saw other compelling evidence of a market drop. Continuing to monitor the markets makes sense and here are more elements of my bearish case to add to those from last week:
- Market indices continued down
- Nasdaq broke a key trendline – click here for affiliate Adam Hewison’s analysis
- Market leader AAPL dropped hard after its product announcement (watch a Hewison video on AAPL). Since AAPL led the way up, I wonder if it will lead the way down.
- Breadth (A/D line) dropped below its 50-day MA
Selling short at this point may be too aggressive and I’m not recommending it for everyone, or to anyone for that matter. Even if you don’t want to go short, you might want to glance at the Signals pages to see if any stocks you already own are on the lists and consider carefully whether you want to own anything with negative divergences at this time.