Each week we identify names that look bearish and may present interesting investing opportunities on the short side.
Using technical analysis of the charts of those stocks, and, when appropriate, recent actions and grades from TheStreet's Quant Ratings, we zero in on three names.
While we will not be weighing in with fundamental analysis, 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.
DuPont Catches a Downgrade
The chemical and materials giant has been on the rise of late but right up to some heavy resistance, so a short play is in order. Moving average convergence divergence (MACD) has not broken out to a buy signal as we might have expected, and while we do have a series of higher lows the stock refuses to break up toward the $75 level. That could be problematic when the stock market reaches a maximum overbought, which will be just around the corner.
Notice volume has been getting worse as DuPont rallies; that is a bad sign, indicating the big institutions lack conviction. Consequently, we would put a low-risk entry short on here. Target the 200-day moving average at $67, but put a stop in at $75 just in case.
Futu Holdings Runs Into Resistance
This provider of digitalized securities brokerage and wealth management product distribution services has been on a nice roll but it seems to have run into trouble at the 200-day moving average. That has been a problem area in the past; note in the spring there was plenty of selling.
Money flow is weak (bottom pane) while volume trends are also very poor and pointing bearish. Though relative strength has been strong we are near the top of the range. A rally on poor volume is likely to fail more often than not. We could see a move back to the low $30s here, so put in a target of $31 but set a stop at $48 just in case.
The operator of online commerce platforms in Latin America has been in a sharp decline since a triple top was established in late May. No doubt MercadoLibre has missed the boat as the relative strength is poor and money flow is still bearish. Hard to believe a big company such as this would perform so badly given the space has been strong, but a move to the 200-day moving average here is ominous.
Yes, the stock is bouncing off this level but it is not a buy. Indeed, we see a low-risk entry point here as the cloud is red and a double MACD sell signal is locked in. If short, aggressively target the $940 area for a nice 20% gain, put in a stop at $1,250 just in case.