These names are displaying technical deterioration and hence bearish tendencies.
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.
I've Got Reservations About Wyndham
Wyndham Hotels is oddly bearish in a group that has been strong all year long. Yet this stock remains under pressure, with lower highs and lower lows, though some support still remains around the $63 level.
Notice the weakness in the Relative Strength Index (RSI) on the top pane; also, the full stochastic are starting to roll over. That's a bad sign and could signal much more weakness. The bear flag created is evident by the weak rally attempt of the last week or so. Moving average convergence divergence (MACD) is also on a sell signal. If short, target the $60 area for an aggressive move down, but if that fails to hold this stock is heading into the low $50s. Stop yourself out if the stock moves to $71.
World Kinect Runs Low on Fuel
World Kinect is a new name but the chart of the producer of fuels for the aviation, marine and land transportation markets is horrendous. The stock remains troubled at a time when the rest of the market is shooting higher. No doubt the relative strength reflects that trouble, and notable on the indicators are a strong sell on the MACD and the full stochastic.
The gap from about eight sessions ago remains resistance. The downtrend line is going to be stiff resistance as well (yellow line). A break of the recent low around $20 will get this going further downward, so let's put a target of $14 on WKC for the downside, but put in a stop at $23 just in case.
H.B. Fuller Looks Fragile
While not on the Quant Ratings' downgrade list, we found H.B. Fuller stock to be rather bearish, and believe there is some downside left after Wednesday's sharp move down for the maker of adhesives, sealants and other specialty chemicals. Notice the 3 candle formation circled. This is what's called an evening star pattern, where we see a green/white candle followed by a doji (indicates indecision), then a red candle following. This is a reliable pattern that indicates more downside to come.
The indicators are actually bullish but overbought currently, so a bit more downside and crossing the 200-day moving average should get this stock moving downward quickly. We see good support at $62, so a break there means this stock could head down much further. For now, we could set a target of $63, but put in a stop just above Wednesday's high at $72 just in case.