Frequently Asked Questions

Short-Sale Set Ups
What is a voodoo day as it relates to short selling?

A voodoo day is an up day at the end of a wedging rally where volume dries up sharply, usually -45% below-average. The day you cite, 1/19, meets neither one of these criteria. There's no need to screen for this - I just keep watch lists of short-sale targets and watch their action from day to day. If I see a wedging rally after a prior downtrend, then I watch for the rally to lose steam as buying volume dries up. That's the basic idea, volume drying up at the end of a rallying that indicates buying interest is diminishing, so the rally may likely give way to the downside and the macro-trend will resume.

Published: Mar 10 2011