One key to success in using stochastic to look for shorting opportunities is to zero in on a stock that is in a persistent downtrend. This is clearly the case here. Red bars dominate the price graph and the short ill-timed green bars mark where Powertel tried to come up for air and failed. As is always the case when evaluating the colored bars on top of a price graph, the color that dominates is the one that counts.

The time to short was signaled by stochastic (the stochastic indicator graph is the one on the bottom). The stochastic lines formed an 'inverted pail' during the bounce. They went into overbought and stayed there. The stochastic lines go into overbought when they cross the upper reference line. This was due to the fact that the rise in prices was very linear and prices closed near the intra-day high almost everyday. The stochastic algorithm is sensitive to where prices close relative to the intra-day range. If prices close near the high end, the stochastic lines point and move upwards. If the lines are already in overbought territory when this happens, they stay there.

When prices started to cup right before the leg down, stochastic fell out of overbought. When the stochastic lines start turning down, place the short sale. Actually, shorting as prices were cupping would have been better, but that is a harder opportunity to spot.

This situation can be summarized as follows:

   MACD Downtrend
+ Stochastic Overbought
+ Weak Volume during the bounce
  ---------------------
  Excellent Shorting Opportunity!