Short-Selling with the O'Neil Disciples Quotes

“Stocks can often begin an overall topping phase with the formation of a big, ugly pattern whose dimensions are so exaggerated as to resemble something outlandish, which we might refer to as “Clown's Foot Syndrome.” They're like the oversized shoes that clowns typically wear and which look woefully out-of-place within the context of the overall picture.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“In most right-side POD failures, once the stock breaks down it will generally carry through the 20-day moving average and then find support at the 50-day or 200-day moving averages, depending on where they lie within the overall pattern, and then try to rally. In most cases this rally will carry back up into the 20-day moving average, which presents a secondary short-sale entry point. The breakdown from there is nothing short of exhilarating for any short-seller short the stock at that point!”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“Wedging rallies up into the 50-day moving average, or any other moving average for the matter, rarely stop exactly at the moving average itself. It is very common for a stock to rally just past a key moving average, only encountering resistance once it has rallied 2–3 percent and sometimes as much as 5 percent or more beyond the moving average. The key is to watch how the stock acts as it moves above the moving average and be on the lookout for voodoo days or a high-volume outside reversals to the downside.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“The most important aspect of any trade is not where and how you enter the trade, but rather how the trade is handled from that point on.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“The action of a wedging rally or a bear flag occurs after a prior price breakdown, and the two formations are really just different versions of the same phenomenon. The difference is that a wedging rally following a prior price break or downtrend occurs as a stock bounces while a bear flag occurs when there is not a significant bounce and the stock just moves sideways. In both cases, the stock is consolidating the prior downside move.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“I will look to short into low-volume moves up to the top of the bear flag's price channel once I can determine a reliable high in the pattern.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“From a psychological point of view, the POD occurs when a hot-stock high-flyer breaks down severely, at which point it is able to bring in investors who missed the prior big price run and see the stock as “cheap.” This sets off a very rapid price advance back up to the highs and the left side of the POD that is quite simply unsustainable. At that point, everyone who is going to buy the stock has, and the sellers who hit the stock at the left side peak of the POD can now finish distributing their stock. With fewer “suckers” left to buy it, the stock then breaks down in rapid fashion and in most cases to new lows.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“LSFB set-ups are generally shortable as the stock drops back below the prior base breakout point and the 10-week (50-day) moving average.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“Late-stage cup-with-handle formations seem to be particularly vulnerable, especially when they are very wide and loose. A cup-with-handle formation is often a very productive first-stage base to see when a stock is just starting a big upside price run, but when you start to see these sloppy late-stage cup-with-handle formations after a long upside price move, they can often mean that trouble is brewing.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“The huge-volume price break off the peak that defined the right side of the head in the pattern almost always resulted from a late-stage base breakout failure.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“Screening for stocks with heavy-volume price breaks on a daily and weekly basis is the most effective way to catch potential short-sale targets once they start to come under distribution.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“A pocket pivot buy point occurs when a stock moves up through or off of the 10-day, 50-day, or 200-day moving average on volume that is higher than the volume on any down day (the volume on up days is not a factor) over the prior 10 trading days.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“Only sell short stocks that trade a minimum of 1–2 million shares a day, and preferably more. In general, avoid thinly traded stocks as short-sale candidates, as risk can correlate inversely to a stock's trading liquidity.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“All of the short-selling chart pattern set-ups that we use rely on a high-volume break off of the peak, and this is often the first sign of institutional money exiting a stock en masse as they begin “distributing” stock.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“The most optimal H&S formations generally have the right shoulder forming below the left shoulder.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“Short-selling is nothing more than a method of investing and trading that recognizes the life-cycle paradigm arising from an economic system that thrives on creative destruction. A major component of that creative destruction is the process of cleaning out prior excesses and forcing the redeployment of capital to more productive areas of the economy.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading

“P/E ratio is less a measure of static value and more a measure of the marketplace's current assessment of a company's forward earnings stream.”
― Gil Morales, Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading