7 Great Stocks to Short with the Market Heading Down
Posted by Blain Reinkensmeyer
February 7, 2008 at 11:13 am
Looking for stocks to short? Well, this list is for you.
With the market so volatile to the downside there are many easy plays that can yield you quick profits. The overall trend right now is bearish, so play the downside and you have a good shot at being a winner. The smart investor is always the successful investor.
Baidu.com (BIDU) Stock, $230
This stock was a great short candidate first with the move below $262.43, and again with the move below the 200 MA below $248.30. A key entry now would be with a pullback to the 200 MA, with a great cover price being $268.10.
Amazon.com (AMZN) Stock, $68.49
I shorted Amazon at $72 yesterday, current stop at $74.25. The stock was technically first a short with the fall below $73.37, then again with the fall below $72. My target for AMZN is $60.
Apple (AAPL) Stock, $122
Apple was a short yesterday with the fall below $126. The stock was trading horizontally and the fall to new multi month lows suggests lower prices yet to come.
Blue Coast Systems (BCSI) Stock, $23.59
Three short points on BCSI, first the fall below $26, then the fall below $23.87, and next coming up a fall back below $22. Look for strong distribution volume to confirm the trend.
Garmin (GRMN) Stock, $63.41
As I am watching GRMN intraday live the stock has pulled above $66.23 which signals it has begun to fill the gap range from February 5th. Technically making this stock a buy with target price of $71. On the short side look for a fall below $61.82 to make for a great entry.
Mercadolibre (MELI) Stock, $33.95
I liked MELI first with the fall below $40 which came with good distribution volume. Volume has been drying out now this week and the stock should see lower prices to come. Look for heavy volume to lead the way.
Humana (HUM) Stock, $73.18
What a great short entry this made yesterday with the fall below $75.57. MELI is currently trading down another few points today, and should test its 200 MA (or $69 - $70) in the near future.
Extra Notes: When shorting, look for small quick gains, not sizable long positions. If any short yields 20%, immediately sell and walk away. Limit your upside exposure to no more than 3 - 5%. A stock that has been heavily sold off can easily jump back up in price quickly.
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[...] 7 Great Shorts In Down Markets [...]
Filtering down stocks and investment interest….
As a new investor (although I have not traded actively in options), I’m always coming up with new ideas. One that came to me when watching Fast Money on MSNBC was weighing the call vs. put volume vs. an invividual stock. Albeit, it may a bit off, I often look at the underlying strike price on an option when purchasing an inividual stock (as well as doing the homework of course). Disclaimer: you always want to look at the underlying fundmentals (nope, I don’t trade off of charts well at least until I’ve done my homework).
My favorite site is google as you can look up the ticker symbol and it gives you the put (option to sell the stock) vs. call (option to buy the stock). I know options are advanced, but think of it as a raincheck, for more information…. look up options on yahoo. I myself use them as an underlying indicator to help me with my “homework” on a stock and what traders are thinking. The one thing that I don’t know is…..what % of Mutual funds own these underlying options, but sincerely, there are some invidual investors that deserve some attention, even though they may be wrong (such as the one that bought 200,000 puts on QQQQ last week).
Also, keep in mind, buying Puts are lower risk than shorting a stock directly (disclaimer I don’t have shorts as I trade on cash, but have cashed out on my bearish position [look for ultrashort ETFs if interested]).
Also of interest is:
http://www.stocktradingtogo.com/2007/08/17/37-tips-facts-and-rules-for-trading-stocks-in-a-bear-market/
Thank you Blain.
#5 & #6 of course……
My broker keeps telling me how much $$ i’ve made. As an individual investor, I keep thing CDs. This guy can set the bar higher [which so far he hasn't] or we as investors can do our own research and set our own goals.
Sorry for the long post on the above, if you are looking at analyzing a stock look at options and:
Open Volume
Open Interest
Calls vs. Puts
Then do the math and weigh it in, but don’t let it make your ultimate decision!
Well, i started thinking about the last post, and options are helpful but may be confusing to the new investor. Also sometimes they are misleading (there was a recent major investor that bought $41 puts on the QQQQs…being a bull …well I may have a differing opinion). Also, a lot of data to sort through by expiration date. I like to keep an eye on them, but forgot to add the basic on shorts, which is:
Short Interest!
Short Interest is what I also use in analyzing a stock’s direction as well (since the original article was on shorts) as well as the Short Interest Ratio.
Now if only we were all lucky to think of shorting MBIA or Amback about a year ago….;-)
Happy Investing, Ray
Enron or Worldcom, or heck even more recently CFC would have worked well too…