Alliant Techsystems (NYSE:ATK) — We added this stock to our list of short-sale candidates on April 19, 2011, when it was trading at $79, and it has underperformed the market ever since.
This company is still the largest supplier of ammunition to the Pentagon and a significant supplier to NASA. Along with the cutback of government funds to NASA, ATK’s sales to the Department of Defense are estimated to decline 5% this year following a flat year in 2011. Earnings per share for FY 2012 were $7.93, down from $9.32, and analysts are looking for a decline to $6.74 in FY 2013.
After declining to $54 in December, ATK rose to its 200-day moving average at over $60, but turned away from re-establishing its bearish resistance line now at $50. Since March, resistance to rallies has been turned aside at the 50-day moving average, now at $49.78. Note the recent sell signal from the stochastic and the clearly defined bear channel.
Sell ATK at the market or short the stock with a minimum downside target of $43. A system of trailing stop-loss orders could render an even higher return. Short-selling is a speculative, high-risk technique, so protect all shorts with a stop-loss order and check with your broker for any special requirements.