Hey traders,
Yesterday I showed you how I hunt strength on red candle days — my simple 52-week high trick and how to filter the list down so you’re not drowning in tickers.
If you missed it, start with that quick read and then come back here for the follow-through.
Today I’m flipping the coin.
When the market really breaks — when the bullish trend is really over and everything starts taking a dive — the fastest money is often on the downside.
You’ve probably heard me recite the old saying before: “stocks take the stairs up and the elevator down.“
It’s not an exaggeration. It’s just how liquidity works when fear hits.
Prices gap down. Bids vanish. Moves that took weeks on the way up can happen in five trading days on the way down.
So I keep a shortlist ready. Here’s exactly how I build it.
My Plain & Simple Shortlist Rules
- Price first: I start with triple-digit stocks ($100+). They have room to fall in dollars, not just pennies. In today’s market that’s likely to be a lot of tech stocks.
- No earnings: I prefer names with no profits or shaky cash flow. When the tape gets rough, weak balance sheets get punished fast.
- Tech tilt: In a real flush, high-beta tech usually takes the first punch. That’s where the biggest percentage moves show up.
- Clean chart: I want failed breakouts and broken trend lines. If a stock just lost a key level, I don’t argue with it.
- Volume spike: Red bars getting bigger day over day? That’s fuel for follow-through.
How I trade it without overthinking
- Keep size tiny. One contract. One shot. Add only if the move is working and levels cooperate.
- Have a line in the sand. If price reclaims a broken level and holds it, I’m out. I don’t let my ego get in the way.
- Take the quick paydays. When the selloff speeds up, I take profits in chunks — half on the first hard flush, another piece if the next leg hits, and I keep a small runner with a tight stop. Fast drops bounce, so I don’t try to catch the exact bottom.
- Pick your tool:
- Puts if you’re comfortable with direction.
- Bear call spreads if you want defined risk and a little room to be early.
- Short shares only if you understand how they work and and your specific trading platform’s rules.
Timing matters
I don’t predict the day. I prepare for it.
If seasonality and headlines line up and the index loses a key level, I stop “hoping for a bounce” and go to the plan above.
If the market snaps back, great — I’m flat or I took my small swing. If it keeps sliding, I already have the right names on deck.
A quick reminder
This is not about hating a company. It’s about trading behavior. Strong trends up… weak names down. Same game, different side.
Bottom line: build the list before the drop. When everything starts dropping and the elevator doors open, you won’t have time to think — and you’ll be glad you have that list in your back pocket, ready to execute.
Trade well,
Jack Carter
P.S. In the meantime, we make hay while the sun shines… With markets in a bullish trend, my data shows these specific stocks have a 10 year history of popping every August!
