The red flags that tell you stocks are set for a slide

There are several signals investors and short sellers look for to gauge whether a company’s shares could be due a fall. They range from boastful bosses to suspiciously strong profits, says Matthew Partridge.

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Tesla's CEO Elon Musk sails close to the wind
(Image credit: Credit: Newscom / Alamy Stock Photo)

What short sellers do "should be illegal", tweeted Tesla CEO Elon Musk earlier this month. He's hardly the first person to lambast those who seek to profit from falling share prices. Shorting entails borrowing shares and selling them with a view to buying them back later at a lower price, before returning them to the owner. In the early 17th century regulators in Amsterdam banned them, holding them responsible for forcing down the share price of the Dutch East India company. Napoleon declared the practice treasonous. Shorts were also blamed for exacerbating the 1929 and 2008 market slumps.

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Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri