Short sellers make money when stocks go down

The Ticker

July 02, 1999|By Julius Westheimer

SEVERAL READERS have asked what selling short is. Worth magazine provides this explanation: "You think a stock is headed down, so you sell the stock `short,' meaning you borrow shares from your broker, sell them, and later buy an equal number of shares to repay the broker. If the stock crashes, you replace expensive shares with cheap ones, pocketing the difference. If it shoots to the moon, you're in big trouble."

The Cabot Market Letter advises: "Hold onto your strong stocks but build cash with funds from weaklings you sell at a loss. Have 25 percent in cash for future purchases. Don't make the mistake of selling your strongest stocks. History shows they resist market declines better than other stocks."

WALL STREET WATCH: "We think the next major move will be up. Meanwhile, a correction could send stocks lower and offer significant buying opportunities for patient investors." (Dick Davis Digest)

"Continue to stay in a defensive position. Our indicators are in negative territory." (Investors Intelligence)

"Prepare to sell your stocks `short' heavily this year. Odds are completely against making money from current levels." (Overpriced Stock Service)

Pub Date: 7/02/99

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