Bearish Bets: 3 Stocks to Short 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.
Abercrombie & Fitch Fails at Just the Wrong Area
With a series of lower highs, lower lows Abercrombie & Fitch ANF is pointing downward, and there is plenty of room to run. The recent failure at the interim top in August is a bearish sign, and with a textbook downtrend now in place there is nothing to stop this stock from testing lower levels. In fact, the April lows down at $110 or so is now in play, and that would be a nice objective for a short play.
The technical condition and indicators are atrocious, with heavy volume to the downside this week. This is institutional sellers stepping up to distribute the stock, and very bearish.
The Relative Strength Index (RSI) has rolled over as well; we just don't see any interested buyers stepping up. However, a good short opportunity is at hand, ao let's set an aggressive target to $110. Put in a stop at $153 just in case.
Bath & Body Works Chart Needs to Be Freshened Up
Even before Bath and Body Works BBWI posted earnings this past week the chart showed the stock was in trouble. We really did not need to see the official results to know they would be bad, but they did confirm our suspicions — horrendous earnings and guidance.
Money flow has been bearish, the cloud is red (bearish) and the Moving Average Convergence Divergence (MACD) is about to roll over. The price chart shows a pattern of lower highs, lower lows — a textbook downtrend in place.
Even the recent pull-up in price was not enough to overcome the wave of selling that was to come. So, we see more downside, perhaps into the mid-$20's very soon. Let's target the $25 area for starters, put in a stop at $37 just in case.
PDD Holdings Is Representative of China Stocks' Troubles
Several big Chinese names have reported earnings and mostly with mixed results. The latest big name was PDD Holdings PDD, formerly Pinduoduo. The stock was bludgeoned this week with a massive swipe post earnings. The company beat and guided modestly higher but was sold indiscriminately, and it continues on. There is just no escaping the massive selling in this name.
Money flow is bearish, RSI has fallen out of bed while the MACD is on a sell signal. Do we need anything else? Of course, the stock will bounce at some point, which will be another sell opportunity.
For now, we see a bit more downside but suggest a smaller short allocation here, targeting the $79 level, stop at $105 just in case. If the stock bounces to $98 short more shares.
