I don't enjoy shorting in the hole. Shorting the opening gap or the lows here looks like a tough risk-reward setup. There are lots of bearish charts decorating the scan, but I would look to short a bounce as I think we could be primed for at least a partial gap fill.
Darden Restaurants (DRI) has a challenging looking path to recovery and one big potential downside trigger, so it has my attention. On the daily chart, the stock is way deep into bearish territory on technicals from momentum to price to trend. It is bearish, but not oversold. The bounce off the August lows created a bearish flag and unless DRI can re-establish a zone above $70, I believe $68-$70 will act as strong resistance here, ultimately sending the stock to $61 on a close under $66.
Moving averages are now heading lower and I would want to see something like the moving average convergence divergence (MACD) indicator and relative strength index (RSI) cross over bullish before considering any play.
On the weekly chart, $65 comes in as support with $68.50 as resistance. A little different picture than the daily chart. While momentum and trend have lost their strength, neither is particularly bearish yet. The RSI could close under 50 this week, which I would view as very bearish since we haven't seen that level for a year now. Slow stochastics are trending lower, but I'd also want to see a break below 50 before completely throwing in the towel.
Why do those matter? Because of the price action. Note the potential bearish head-and-shoulders pattern currently being created. A weekly close under $65 targets $55 on the downside. Again, we need a close over $70 to negate this pattern. DRI can continue to trade between $65 and $69 resulting in the right shoulder some pattern traders may be waiting for to get more involved.
We aren't quite setup for a bearish play or short entry, but this is one to keep on the radar for both daily and weekly setups on the short side.