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.
AES Runs Out of Juice
Once a stock makes a run to the 200-day moving average like AES has, there is often a pause to see if its long-term support will hold. If the downtrend is severe enough, then it is likely it won't hold and a new support level will need to be found. We think that is the case for this power generation and utility company, which has been losing support levels along the way to the 200-day MA.
With a series of lower highs and lower lows there is more downside potential here. Volume trends are picking up as the distribution becomes more intense. The cloud is red and moving average convergence divergence (MACD) is on a sell signal. If short, ride this out to about the $20 area, but put in a stop at $27.50 just in case.
DT Midstream Slides
Not many stocks are producing consistent patterns, but the bearish ones are becoming more visible. This one on DT Midstream shows a big series of lower highs and lower lows in a deep selling pattern that accelerated to the September lows in the shares of the provider of integrated natural gas services.
While a bounce is imminent, that is likely to be sold as it was in previous up sessions (including last week). Money flow is now negative as well. If short, target the $40 area, put in a stop at $55.
Arcus Biosciences Sinks
Another chart with a pattern of lower highs and lower lows and a retreat to the January lows. This time, the clinical-stage biopharmaceutical company has broken that low and closed below on higher volume. That's a sign of more downside to come.
Money flow is weak and the cloud is red. Also, the Relative Strength Index (RSI) at the top is just atrocious, with a steep slope downward. That spells trouble. If short, ride this down to the $13 area, put in a stop at $20. It's just a very bearish chart here.