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.
Short Insights on Incyte
This biopharmaceutical company has been a wild mover this year; it has spanned a big range the past six months of $65 on the low side and nearly $85 on the up side.
A double top is in place and money flow has turned bearish while moving average convergence divergence (MACD) remains on a sell signal. The Relative Strength Index (RSI) is sloping downward at a steep angle, too, and with the June lows not far away we could see a move down toward $67 or so rather quickly. Target that area, but put in a stop around $76 just in case.
Grand Canyon Falls Into the Abyss
This higher education company has been under fire for a while; the chart shows a wide and slightly angled downtrend channel. Grand Canyon Education is now near the lower end of the channel and got there pretty quickly following a mass of selling in early August. Buyers have yet to step up, so this stock is looking for a bit more downside to come.
With weak indicators (MACD, RSI), a rollover is not a surprise. This really is a nice spot for a short down to the mid $70s; target the February lows around $74, but put in a stop at $91 just in case.
Medifast Slims Down Fast
The producer of weight-loss products shows a monster move down on huge volume, but also follow-through after a bit of short covering. Medifast looks broken here, with a bearish RSI and red cloud along with a sell signal on the MACD.
This situation could get ugly, with a break of that recent low in early August. We think it will happen. Target an aggressive move down to $115 or so, and put in a stop at the recent high of $145. This could be a nice payoff once that August low breaks.