Bearish Bets: 3 Large-Cap Stocks You Should Consider Shorting This Week
These names are displaying bearish tendencies based on their technical patterns.
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Welcome to another edition of Bearish Bets, our weekly feature where we identify three stocks that look bearish from a technical perspective and may present interesting investing opportunities on the short side.
While we will not be weighing in with fundamental analysis on these issues, we hope this piece will give investors interested in stocks on the way down a good starting point to do further homework on the names contained herein.
Constellation Brands Shows a Bearish Reversal
Earnings this week were pretty good for Constellation Brands STZ yet just not good enough to push the stock higher. In fact, the sharp reversal of fortune seen on Wednesday sets up a move to the downside if there is good follow-through.
Always a volatile name, STZ was in a range prior to earnings and simply moved within that range following earnings. Yet, there is a chance of more downside.
The indicators are turning bearish, and that big volume session from Wednesday sticks out like a sore thumb.
Momentum to the upside is done for now, and Moving Average Convergence Divergence (MACD) is also on a sell signal. So, we could see a good short play down to the $235 level and beyond there perhaps a more aggressive move toward $210.
First Solar Is Flaming Out Fast
What goes up eventually goes down. That's certainly the case for First Solar FSLR, which has come down sharply following a very strong move upward. That move up was on pretty strong turnover but now this recent move lower is on even bigger volume, higher volatility and momentum to the downside.
It's as if the "hot" money is letting go the shares and moving on. That often happens with momentum names, they move up and down sharply as traders pile in for potentially a short-term score.
But even after all of this movement if you're a bull you have to be concerned. Indicators are bearish now and modestly oversold, so a bounce is probable. In fact, Wednesday saw a substantial move higher yet was stopped right at the 50-day moving average. That is a natural spot to reject a rally, so a short here reflects what we call a low risk entry point.
We suggest a short there down to a $190 breakout point, but we know we will be wrong with a move above $251, which is where our stop would be located.
Nike Just Can't Do It
The worst-performing Dow Industrial stock by far is Nike NKE, which cannot seem to generate any positive momentum. With indexes making new highs, this stock is being left behind.
It appeared that before the last earnings report the bad news may have been priced in, but a whole host of more problems for the big apparel/shoe maker came to the surface. Investors/traders said "enough is enough" and sold this stock down to more than a two-year low. That is some move down and one would think a 20% drop was extreme, and bargain hunters would be out.
Think again, the stock remains under pressure. Just because an oversold reading occurs does NOT mean it is a buy, and actually it is probably a low-risk entry short play. MACD is on a sell signal, the Relative Strength Index (RSI) is oversold and holding there while stochastics are bearish.
Momentum is to the downside, so we would target the $70 level and slightly below, but set a stop at $81 just in case.
