Short This Soon-to-be-Ailing Health Care Stock

Community Health Systems recently fell from resistance line and could break support


Community Health Systems (NYSE:CYH) — This owner and operator of 131 hospitals, 63 licensed home care agencies and 30 licensed hospice agencies has been downgraded by several research analysts. On Sept. 21, S&P lowered its rating from a “hold” to a “strong sell,” saying that the stock was overvalued after advancing 65% year to date and trading above their target.

CYH has higher-than-average debt, and revenues for 2013 are expected to be at the lower end of estimates.

Technically, the stock recently fell from a resistance line at $30-$31. Its next support is at the 200-day moving average at $23.66, and if it breaks it, then the target would be the June low of $20-$21.

CYH is on our list of Stocks to Sell in October. It also appears to be a short-sale candidate at the current price. Short-selling is a high-risk, speculative technique, so a stop-loss order should be entered to protect against unlimited losses. Check with your broker for any margin requirements.

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