Not everything is rallying today, and those are likely the best names to focus on if looking on the short side.
A few master limited partnerships (MLPs) have struggled recently and even though I just had one on the bull side this week, I'm looking at another for the bear side. I don't see them as mutually exclusive. A trader can be long Oneok Partners (OKS) while looking short on Cheniere Energy Partners (CQP). Cheniere is struggling to hold support in a bear flag set. A close under $26.65 and the stock will be set up to test $25 at the very least. We are currently mired in bearish indicators.
I will look at oversold names from time to time in hopes of identifying an attractive reversal candidate. Right now, however, I just don't see Cheniere as a solid candidate for that approach. Each push in underlying indicators, whether it be momentum, trend, volume or volatility, has been met with little price fanfare. About the best has been the moving average convergence divergence (MACD) bullish crossover, but only with a tight stop. I would look for that along with a close over the 10-day simple moving average (SMA) if I wanted to play a reversal. I don't see it right now.
If I'm long, then I would look for a hedge or just step aside until some strength presented itself.
Quidel (QDEL) doesn't look too weak in a green market, but this chart does have something to offer. I'm including it in the bear side for now, but the chart has a nice falling wedge getting very tight and can go either way. In other words, the stock can go down as a volatility play or a break play. Whether it breaks out or breaks down remains to be seen. I believe the approach for QDEL is to wait for the break and stay with it. Therefore, a close below $20 sets the stock up as a short, while a close over $20.50 sets it up as a long. I believe the downside offers more than the upside by a 3-to-2 ratio, but both are attractive.
So, why is Quidel on the bear side at the moment? Well, we have a force index recently pushing into the red, the stock is trading below both the 10-day and 50-day SMAs, the MACD is set up for a bearish crossover, and both the commodity channel index (CCI) and relative strength index (RSI) are in bearish territory. In simpler terms, there is nothing bullish about the secondary indicators. One could argue there are bullish divergences with higher lows in the CCI, RSI and Force. I wouldn't argue against it, but that's why the price pattern is so important.
Be patient and wait for the break. I could see a quick 5% to 7.5% on a breakout or breakdown within a few days after entry. That would be very attractive in the current environment.
