/ Trading

Shorting overvalued stocks

Today's daily dispatch from Casey Research shared few perspectives on the market crash that started with the Shanghai sellout. For the uninitiated on the topic, China’s stock market sank 8.5% lower. It was the largest single-day loss for Chinese stocks since 2007!

Let's look at the trend of the HANG SENG INDEX for some perspective.

Historical Trend of the Hang Seng Index

BTW, the above plot can be generated using R with the following code:


My favorite lines (from personal experience) are below (and yeah! I really went short on AMZN a long time back! and got burned!)

Chris Wood agrees that Amazon and Netflix are expensive…

But that doesn’t mean you should bet against them.

Chris says you shouldn’t short a stock just because it’s expensive:

Amazon and Netflix are overvalued based on traditional metrics…





And yeah! Here is Amazon's stock trend just for some perspective! It went one way! UP!

AMZN Historical Trend