Bearish Bets: 3 Stocks You Should Think About Shorting This Week
These stocks 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
Homebuilder Lennar Has a Structural Problem
Earnings this past week from Lennar LEN were decent but guidance was poor, the stock suffered from the news. We can see the very weak action on Tuesday with higher volume to boot. That is a sign of big institutional selling or distribution. When the big money is leaving a stock (circled volume) it is NOT time to be buying yet. MACD has turned lower and the RSI is sloping downward, another negative - especially when markets are hitting new highs.
We see more downside coming here, the 200-day moving average (black line on the chart) will be good support but eventually that will fail and lower support will be tested. Target the $130 level, put in a stop at $158 just in case.
Alarum Technologies Breaks Badly
There is nothing like a very poor trading day on high volume to ruin a nice pattern. That is what happened this past week to Alarum Technologies (ALAR), which broke the nice five month uptrend pattern. Fortunately, the 50-day moving average held in nicely but this chart looks broken here. Money flow is poor, MACD is rolling over and the RSI is also weak. While some bargain hunters will no doubt step in here, the trend appears down.
Therefore, we see a nice short opportunity. Given the strong move up from January for Alarum there are several layers of support to the downside, hence some nice targets. Let's first look to a move towards $18, an aggressive move but one where buyers picked up the stock heavily back in March. Put a stop in at $37 just in case.
Ball is in Need of a Reset
Just a miserable day for Ball Corp BALL this past week as the stock broke the 50-day moving average on pretty strong turnover. That was a devastating move for the bulls out there, higher volume selling is big institutional distribution. While the stock could rally a bit from this oversold area it won't amount to much. In fact, the 200-day moving average looms large and its likely to be tested, a nice target.
MACD is a on a double sell signal, what more could you ask for to short the stock. The RSI is simply horrible and is now oversold. Remember, that does not mean buy. Let's target the the 200-day moving average first at $58 then lower to $54. Put on a protective stop at $65 just in case.
