Bearish Bets: 3 Stocks Ready to Be Shorted This Week
A close look at the charts reveals several names that are poised for further losses, giving investors a lucrative opportunity.
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Welcome to another edition of TheStreet Pro's 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.
Dollar Tree Continues a Dramatic Decline
Selling begets more selling.
We recently saw a monumental decline from Dollar General DG, which rattled the cages of competitors, then a collapse last week from Dollar Tree DLTR following a big miss on earnings and guidance. DLTR's chart looks atrocious and is unlikely to see much of a recovery anytime soon.
In fact, look for more big money holders to simply distribute (sell) the stock over time, which means the stock price is likely to go down. Would it have been better to have this short on two weeks ago? Of course, but at the time an oversold reading was not at good percentages to play a short until it fully broke down.
Let's look at a short play here, target the $48 level, put in a stop at $70 and if it climbs short more. This is a very bearish chart.
Core & Main Gets Whacked and May See Much Lower Prices
Core & Main CNM, a distributor of water, wastewater, storm drain and fire protection products, was pummeled last week on very heavy volume. The company missed earnings badly but the setup was right there for weeks. A trendline down connecting lower highs was in place, and the stock seemed to have good footing at the $47 level before the weight of selling was just too much to overcome.
Indicators are bearish, the Moving Average Convergence Divergence (MACD) is now on a sell signal, while money flow remains bearish (bottom pane). The Relative Strength Index (RSI) is oversold but that is no reason to buy, of course.
We see more downside to the $35 area as big holders continue to shed the stock. That volume on Wednesday was huge, bigger than the one-day selling in early June. This chart is awfully bearish, but put in a stop in at $42 just in case.
Zscaler Gets Smoked, But More Downside Is Probable
There is nothing like a big gap lower to get your juices flowing! Zscaler ZS got torched on Wednesday amid very high volume. Of course, earnings were the reason for the fall, with the company missing on all metrics, including guidance.
The volume was extraordinary and skewed to the bearish side. Money flow, which had been green, turned south quickly. RSI also got to an oversold condition, but that is not a reason to be a buyer.
If we see more followthrough in the coming days it will reinforce our conviction of lower prices ahead. MACD just turned down, the change of trajectory to bearish.
There's nothing positive about this chart, so we set a target of $125 here, an aggressive move but with a stop at $175 to give it room.
