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.
Johnson & Johnson Could Use a Band-Aid
Johnson & Johnson (JNJ) recently was downgraded to Hold with a C+ rating by TheStreet's Quant Ratings.
The pharmaceutical giant has been drifting slowly downward after a sharp rise during the latter part of March. Money flow has been leaking from JNJ, and take a look at the Relative Strength Index (RSI) at the top -- a steep slope downward as the downtrend accelerates.
Moving average convergence divergence (MACD) is on a sell signal crossover since April, and with JNJ below all the moving averages that are relevant I don't see much recovery here in the interim. Therefore, a short play is appropriate. Target the $148 area, put in a stop at $165 just in case.
Warner Music Hits a Sour Note
Warner Music Group Inc. (WMG) recently was downgraded to Sell with a D+ rating by TheStreet's Quant Ratings.
The music entertainment company has been in a miserable downtrend for months. With lower highs and lower lows this chart shows a stock that is heading for trouble.
We have seen very few stocks that were close to hitting their October lows in 2023, but Warner Music Group is there. That level comes in about $22, and that is a good first target. Money flow is weak and bearish, and the MACD is still on a sell signal though trying to rehabilitate. The cloud is red and the current pattern we see is simply a bear flag just before the stock rolls over.
Let's use an aggressive buy stop at $30, look to target $22 and then below there at $17. It's a very bearish-looking chart.
Bowlero Gets Bowled Over
Bowlero Corp. (BOWL) recently was downgraded to Sell with a D+ rating by TheStreet's Quant Ratings.
The operator of bowling centers has fallen hard, especially since its latest earnings report. We can see the sharp drop last week on very heavy turnover. The stock plunged more than 20% on that day, but rallied to create a bear flag and now it appears more downside is coming.
Money flow is negative while the RSI is bending lower at a very steep angle. That tells us this stock is not performing nearly as well as the indexes, which is not good news for bowlers. The cloud is red and the moving averages are bending lower. There is more room to go down here; target the $8 area, put in a stop at $13.50 just in case.
