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Shorting stocks: Indicators that a stock will drop?
The Art of Short Selling by Kathryn Stanley providers for many case studies about what kind of opportunities to look for from a fundamental analysis perspective. Typically things you can look for are financing terms that are not very favorable (expensive interest payments) as well as other constrictions on cash flow, arbitrary decisions by management (poor management), and dilution that doesn't make sense (usually another product of poor management). From a quantitative analysis perspective, you can gain insight by looking at the credit default swap rate history, if the company is listed in that market. The things that affect a CDS spread are different than what immediately affects share prices. Some market participants trade DOOMs over Credit Default Swaps, when they are betting on a company's insolvency. But looking at large trades in the options market isn't indicative of anything on its own, but you can use that information to help confirm your opinion. You can certainly jump on a trend using bad headlines, but typically by the time it is headline news, the majority of the downward move in the share price has already happened, or the stock opened lower because the news came outside of market hours. You have to factor in the short interest of the company, if the short interest is high then it will be very easy to squeeze the shorts resulting in a rally of share prices, the opposite of what you want. A short squeeze doesn't change the fundamental or quantitative reasons you wanted to short. The technical analysis should only be used to help you decide your entry and exit price ranges amongst an otherwise random walk. The technical rules you created sound like something a very basic program or stock screener might be able to follow, but it doesn't tell you anything, you will have to do research in the company's public filings yourself.