I use a combination of technical analysis and fundamental research to determine which stocks are poised to move quickly, regardless of the current trend in the market, though right now the opportunities appear to be on the short side. Here are four names to consider shorting or to buy puts on.
Tenet Healthcare (NYSE:THC) is a hospital owner and manager whose shares have been falling for the past week after hitting a high of $33.50. A model that I employ assesses that high as “terminal” for at least the next month, and that looks like a good call. However, the fiscal cliff nonsense has thrown a wrench in everything because all stocks that are part of the indexes will get lifted or lowered due more to macro concerns than their own issues. Once that cloud of uncertainty lifts, investors can get back to assessing stocks on their own merits. THC is vulnerable to a decline back to the $26 area.
Southwestern Energy (NYSE:SWN) is a natural gas driller and producer that quadruple-topped at $36 and has fallen back to former support at $33. At the moment, this looks like a garden-variety range. But if the shares fall out of the range under $32.50, then it will be starting the new leg of a decline for which next support is not found until $31.25. That may not sound like much, but the puts are very cheap and if it were to fall that much, it could be a good trade.
Allstate (NYSE:ALL) made a “lower high” just below $42 after making a prior high above $42.15. Momentum and volume are both waning and it appears vulnerable to a decline back to the $35 area where it broke out back in mid-summer. Once again, if the fiscal cliff is resolved, Allstate will recover and could even see new highs. If not then we may see a decline that will surprise a lot of people. Once an uptrend like this one is established investors don’t think it can ever fall again, but it can certainly collapse here.
While all of the above look poised to drop, it’s the big energy companies that may have the most to lose in a weakened global economy. And they are in part to blame for the decline of the outsized decline of the Dow Jones Industrials, since ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) are major components of the index. As you can see in the chart below, XOM has broken its 200-day average for the first time since June after doing a toe-tap on that support level back in mid-November. If the recent decline gathers steam, XOM is likely to revisit the mid to high $70 range.
InvestorPlace advisor Jon Markman operates the investment firm Markman Capital Insight. He also writes a daily swing trading newsletter, Trader’s Advantage which aims to capture profits of 15% to 40% and often as much at 100% to 200% in less than 90 days.
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