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.
Chewy Leaves a Bad Taste
Chewy Inc. (CHWY) recently was downgraded to Sell with a D+ rating by TheStreet's Quant Ratings.
The online pet supplies retailer has been a dog for the past few months, with lower highs and lower lows as the stock has now corrected a spectacular 36% since mid-June. Volume trends have been strong and bearish. Notice the weakness in the money flow, too; that is heavy institutional selling, which does not appear to be letting up.
MACD is on a sell signal and relative strength is just horrendous. There is nothing here saying it's time to buy the stock. Rather, the recent action shows a bear flag, and leading into earnings those who bought Chewy were snapped hard as the stock gapped lower last week. There is more downside to come here, so target the mid-teens, but put in a stop at $27 just in case the short covering starts a rally. This chart is super bearish.
Constellation Brands Goes Flat
Constellation Brands Inc. (STZ) recently was downgraded to Hold with a C+ rating by TheStreet's Quant Ratings.
The producer of beer, wine and spirits fell sharply last month and made a run to the 50-day moving average, a level that it now is testing. However, the indicators supporting this recent slide have moved into the bearish camp and there could be more downside following this latest 10% drop from the July/August highs.
Money flow is bearish and moving average convergence divergence (MACD) is still on a sell signal that has been live for a month. Volume trends are extremely bearish, too, as the stock continues to flutter around the $260 area. We see room to drop to $247 and then to the high $230s, which is support at the moving averages. Target those prices, but put in a stop at $269 just in case.
Bank on Citigroup as a Short
Citigroup Inc. (C) recently was downgraded to Hold with a C+ rating by TheStreet's Quant Ratings.
Banks have been struggling of late and there is no worse-looking chart among that group than Citigroup. The move in August was just atrocious, and even as the market started to regain some lost ground at the end of the month Citigroup could not mount a rally. That tells us there is very little sponsorship by the big money players, which is noticeable following the heavy selling that occurred in August.
See the big bar in the middle of the month? Once it was penetrated to the downside that was all she wrote. Money flow is also bearish and has been since mid-summer. There is nothing good on this chart, which makes it a good short play. Target the mid $30s, put in a stop at $45 just in case. This one might ride down even further to the high $20s.
