While Trifecta Stocks is a long-only model portfolio, we are anxious to give our subscribers insight into stocks that may pose interesting investing opportunities on the short side.
Using recent actions and grades from The Street's Quant Ratings service and layering on technical analysis of the charts of those stocks, we have identified five names that look bearish. We will not be weighing in with fundamental analysis, but 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.
Finisar was a high-flying optical technology name but has fallen on hard times. After what seemed a nice low in early September the stock fell out of bed this month on very heavy selling, which seems to be continuing. There is little in the way of support for this name here; any rally should be sold or shorted. Moving average convergence divergence (MACD) is on a sell signal.
The producer of sheet molding compound has been pounded this month on very high turnover, a sign that institutions are selling the name. MACD has turned to a sell signal while relative strength is poor; we could see the 200-day moving average come into play soon (arrow). This name can be shorted or sold to that level or perhaps lower.
The retailer of hardwood flooring was the object of negative news a few years back and made a nice comeback, but recent action is quite poor and we could see this stock head lower toward the 200-day moving average. High volume has been happening on the down sessions and relative strength is poor. Any rally should be sold.
The Brazilian steakhouse chain has had better days; since the summer it has been a series of lower highs and lower lows. The recent break lower was on stronger turnover; momentum is clearly bearish. The heavy outside day on Wednesday closed lower. We may see a bounce that would be a selling chance.
The provider of automated teller machines is in a defined downtrend and just broke the channel to the downside, and on very strong volume. We can see momentum on the bottom pane is weak, with the relative strength on its back. This tells us the stock is unlikely to mount any substantial rally; if it does, that would be a good short opportunity.
The following commentary was sent subscribers of Trifecta Stocks on Nov. 10. Click hereto learn more about this model portfolio and trading ideas service.
-- Bob Lang and Chris Versace are co-portfolio managers of Trifecta Stocks