Just as the case with bullish screens, bearish screens can be set up a number of ways. Are you looking for a stock that has had a nice run and has potentially peaked, or a stock that is stuck in a downward spiral?
To improve our chances for success, our best bet is to find stocks that are in poor performing sectors or industries. Find stocks that have poor fundamentals and, of course, find stocks that have a poor trend or have broken through support levels.
Using the free site of http://finviz.com/ allows us to set up some parameters with the site’s screener tool to find some potential bearish trades. The screener has many filters to choose from with the filters separated into three tabs at the top. A tab for Fundamental filters can be used, as well as a tab for Technical filters, and one tab for Descriptive filters which includes choice of Sector or Industry.
From the Descriptive tab, I would choose Optionable and also choose Over 1 million for Average Volume. A third filter I would choose would be Price over $10. We don’t want stocks that are already so low that they can’t go any lower. You can also pick from Sectors or Industry.
The Fundamental filters are not geared to bearish trades. There are no negative P/E’s. EPS growth filters only offer negative growth but not any specific amounts. You can, however, choose negative Margin amounts such as Gross, Operating, or Net Profit.
The Technical filters have lots of options for bearish trades such as 52 week low, 20 day low, or 50 day low. Choices for the stock’s price performance over days, weeks, months, quarter, half, year, or YTD are offered. Choices also exist for the stock price in relation to the 20, 50, or 200 Day Moving Average.
One key reminder is that trades work best if we go with the trend. That includes going with the trend of the overall market. In a bull market like we have had for the last 2 years, it will be much harder to find bearish trade possibilities and to have them profitable. Better bearish trades can be made when the market is bearish or at least not bullish. Under bullish conditions, you may have a lot of trial and error using different screening filters to find a couple of potential trades. Then switch things up to find a couple more potential trades. Eventually a list of bearish stocks can be built.
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