Trend-line breakdown: A trend-line is a visual representation of support or resistance, drawn on the pivot points of an instrument. In simple words, two or three points are selected to draw simple line that assists in highlighting support and resistance levels. When a stock breaks the support trend-line accompanied with technical indicator or volumes, one can be sure of a breakdown and look for shorting opportunities.
Technical Chart pattern: The chart patterns such as Head and Shoulder, Double Top, Triple Top, Descending Triangle, Rising Channels, etc. provide adequate opportunities for selling once they show a confirmed breakdown.
RSI and MACD: The most common Indicators are the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD). The RSI determines the strength of the stock, where if the value falls below 40, it is said to have started losing upside momentum. Similarly, a negative cross of MACD below the zero line suggests further downside.
Moving Averages: The commonly used moving averages are 50-day moving average (DMA), 100 DMA and 200 DMA. When a stock trades above the moving average, it is said to be in a bull-run, and vice-versa. Similarly, a convergence of moving averages also indicates positive and negative trends from a medium-term perspective. A negative crossover of 200-DMA with 100-DMA or 50-DMA is called as Death Cross, which suggests that a correction of nearly 10 per cent could happen in the counter.
Candlestick Patterns: A breakdown in the various candles stick pattern exhibits weakening of an existing trend. The major negative patterns are Bearish Harami, Bearish Harami Cross, Bearish 3 Method Formation, Dark Cloud Cover, Engulfing Bearish Candle, Evening Doji, etc.