The market now teeters on the brink of a breakout or breakdown as the S&P 500 has spent the week trading around the top of the trading range that has kept the market at bay since May. The million-dollar, scratch that, trillion-dollar question is whether the market is ready to break through the top of the trading range. 

I discussed this a bit in my interview with Maria Bartiromo on Wednesday, which covered the short interest environment in the market. (You can view the video online here.)

Top of the Range, Ma!

For my bet, it looks like there is a good chance of a breakdown in the short-term and, thus, a retracement back into the range, as the light-volume trading that has pushed stocks to their current level is far from providing the confidence investor’s need to start piling cash back into equities.

So what should you be looking for as far as trading opportunities?

How about the stocks that have been tightly bound by the four-month trading range, especially those that are currently sitting at or near their relative trading range tops? 

Stocks to Short or Avoid

The table below displays a few companies that our technical modeling programs have identified as those with a higher percentage probability of spending the next few weeks trading back toward the low levels of their relative ranges.

Let’s take a closer look at two of these stocks.

Monsanto (MON)

Monsanto Company (NYSE: MON) was on my list of short-term bearish trades during my interview with Bartiromo. The reason being that MON and other agricultural stocks are trading near the top of their recent ranges. In addition, we’ve seen the short-sellers reducing their shorts on the stock, which tells us that the potential for a short-covering rally (or buying) has now been zeroed out.

Let’s consider this company as part of a mini-bubble that has been created in the agriculture business. Avoid or short MON.

Symantec (SYMC)

Another stock that has been range-bound for the past four months is Symantec Corporation (NASDAQ: SYMC). The stock has traded in a 20% range between $12.50 and $15. The stock closed trading on Wednesday at $15, tempting both bulls and bears to bite at the game of chicken that will either drive the price higher or lower. Given the other research we’re privy to, I’m betting on the short side and would consider an October put on the company.

I’ve only talked about a few companies that are residing on the trading range “bubble.” I expect that the expiration of the September options contracts Friday will loosen the market up and increase volume, likely to the downside over the short term. So take a closer look at these stocks and prep your portfolio to gain from the short-term decline that appears to be on the horizon.

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