One of the stalking lists that I keep is what I call the “to fade” list. Simply put, I monitor these stocks for an opportunity to short. This list is typically comprised of stocks that have seen a large gap up move, an uptrend that looks to be stalling, etc.

Here is one that is currently at the top of that list: $POM (Pepco Holdings). Here is the Daily chart:

Let’s break this down to show all the elements in the chart adding up for a good fade play:

• The Black candles noted on the chart have been a good tell for future weakness
• RSI is now in overbought territory < key
• Last several days of the up move on declining volume
• Came up “short” in attempt to test the March 2012 highs

Risk to the upside, or down?