The people that beat the market year-in-and-year out, unlike the foolish “talking commentators” on CNBC say, are the investors that buy the best stocks in the the best sectors in the strongest markets. At the same time, the greatest of those traders learn how to sell short stocks when the market is in a downtrend like it currently has been since the November highs.

While it has not been the most steady downtrend it did have its moment from November to January where our personal shorts did very well, including one member who was 15 for 16 for this short one day one week and the next week 20 for 21. I sadly did not “load up” on my best shorts that fell 30% to 50% during this time frame. However, I did have enough winners to not go red.

If we are starting another fresh leg in this downtrend, the new shorts (around 25 positions now) are going to do very well because the stocks I have gone short are showing some very extremely heavy distribution on their weekly charts compared to the volume on the uptrend that in some stocks lasted from the year 2001 to now. The way these stocks are rolling over and selling off on extremely heavy volume could lead to some massive potential gains. The question is if the stock market will selloff in a strong trend like the November to January period. If this is the case, I will be excited for my short positions as they should do very well. Hopefully we will get some CBEY, SIGM, SHOO, GRMN, LFC, COH, SGMS, and TSRA moves just like we did during our November to January selloff. We were short all of those stocks and I think if you study those patterns, you can see quite a few stocks setting up, NOW, in nearly the same exact patterns.

Not only do the best active-investors get short the weakest patterns, after huge prior uptrends, in bear markets, and get long the strongest stocks with the best fundamentals, in the best sectors, in bull markets, but the greatest of greatest active-investors can also make money on the long side while the overall market is falling. This is done by going long the few strong sectors that are moving higher while the overall market is moving lower.

Recently, the market has gone nowhere, making it near impossible for EVERYONE (including the greatest ever–they go mainly cash just like we did) to make money. We did have DGLY and PDO (which were still minor disappointments as in a bull market each would have easily given us 500% gains) but too many AEHR, ACM, BRKR, BKE type of movements came from beautiful patterns. While very strong CANSLIM stocks (mainly from tech and oil/energy/metals) have saved our 2008 and left many of us with small gains to medium gains and even with some with small losses instead of BIG LOSSES, the problem is that this year and the last half of 2007 have been by far the worst period for buying momentum stocks with beautiful patterns. But like I said, one more time, thank God for CANSLIM stocks. Stocks like MTL, FSLR, NEU, CMP, and many other oil related CANSLIM stocks have given our portfolios much needed relief.

Last 5 posts by Joshua Hayes

• Following Through on Friday's Gains Stocks Stage Another Rally on Strong Volume - June 2nd, 2009
• Small Cap and IBD Indexes Lag the Major Indexes with Volume Higher Across the Board - May 29th, 2009
• Are Items That Fill Up Your House too Expensive? Then Rent Them at Aarons Inc. - May 27th, 2009
• Finally We Have The IBD Indexes Leading The Way As Stocks Rally On Heavier Trade - May 27th, 2009
• Ending in Mixed Fashion Stocks Fail to Close Out With Gains Seen Earlier in the Session; IBD Indexes Take the Lead - May 20th, 2009