What I look for in shorting candidates

Yngvai asked in the comments what patterns I'm looking for in my watchlists. I thought I would post it here.

1. long red candles - this sounds obvious, but it's not the same as high day range exactly. Some stocks have longer red candles than white, which skews their ADR down. I don't know if it's useful to calculate ADR separately for red and white candles, but it is something that I am investigating. (Perhaps another calculator? I already have calculator back log.) If you want to see an example of a chart where the red candles are consistently longer than the white, look at PHH:

2. short top shadows on the red candles - this is something that I am actually working on in calculator form. In short, the lower the top shadow on a red candle, the better probability the short will be on red (since you wouldn't short when the stock is green... I don't consider premarket leader drops in these situations- that is actually another category but one that this calculator will be able to analyze)

3. high probability on the co-relation calculator - this one is self explanatory. If the percentage is very low when the Dow is green, then I won't go into it on those days. Only stocks with good numbers (> 50% are considered when the market is soaring). 

4. place on the chart - if you only screen for stocks that are up 8% on the day/15% in 2 days you can miss many good plays that have dropped but still have more down.  FRPT is a good example of that today from my watchlist. 

5. the propensity of a stock for multiday run ups/downs - this is something that you can get from just reading the charts but I want to make a calculator for it to make my life easier and give me more hard numbers to make an evaluation. If a chart is one day up you have to make a call whether it has the ability to keep going. If you wait only for multiday run ups (like I once concluded) you will miss good opportunities like NCT (that was as beaut). Again, it depends on the stock.

**UPDATE

more here.