Never short based on price action. A stock that is going straight up can continue at least until you are bankrupt before falling to the ground.Never short based on valuation. A stock might be expensive at 100 times earnings and it will be even more expensive at 200 times earnings.Unless you are hedging, your short positions should be 1/3 the size of your long positions.Believe it or not, short stocks that have high short interest. In general, short squeezes are a myth and stocks that have high short interest are usually shorted for a reason.Short frauds. A great example is Tim Sykes’ work exposing penny stock pump-and-dumps.Short situations where the macro fundamentals are breaking down and company management is not being upfront about the micro fundamentals. My article on the solar industry and First Solar (FSLR), in particular is a good example.Put a time stop on a short. My article on NILE was an example where I said to sell going into earnings. NILE fell approximately 15% on earnings day.
