3 Blue-Chip Stocks to Short

Advertisement

Investors are euphoric. Stocks are melting higher, led by the non-stop action in heavyweight Apple Inc (NASDAQ:AAPL). Greece only seems to matter when positive headlines cross. And the Federal Reserve seems to be doing all it can to prolong the era of 0% interest rates.

stocks-to-shortAnd yet, after the market’s epic rise out of its late January lows, new short side opportunities are popping up as a wider swath of the market gets overbought and investor enthusiasm reaches rare heights.

The rise in Apple stock pretty much sums up the market’s attitude these days. The Nasdaq Composite has pushed to its tenth straight gain, closing at a mult-year high. According to SentimenTrader, the Nasdaq hasn’t seen so many consecutive gains since July 1997.

The seven other times overall that the Nasdaq achieved this feat, performance was mixed going forward, with only one positive performance over the four months that followed.

Moreover, 40% of the indicators tracked by SentimenTrader are showing excessive optimism. There have only been two other times over the past two years where this happened — September 19, 2012 and December 31, 2013 — after which stocks suffered pullbacks of at least -5% over the months that followed.

In preparation, here are three well-known, large-cap stocks to short.

Blue-Chip Stocks to Short — Chevron Corporation (CVX)

blue-chips-to-short-cvxIn a recent post, I outlined my reasons why I believed crude oil was heading lower and gave three ways to play the decline using ETFs.

But for the more aggressive, individual stocks in the sector are looking ripe for a fall too. Shares of Chevron Corporation (NYSE:CVX) are looking vulnerable to a drop back through its 50-day moving average — a level it hasn’t closed below since the first week of February.

In response, I’ve recommended the March $105 puts to my Edge Pro subscribers.

Blue-Chip Stocks to Short — Alcoa (AA)

blue-chips-to-short-aaAlcoa Inc (NYSE:AA) stock has resisted the downward pressure that has hit many materials stocks — and associated plays like Caterpillar Inc. (NYSE:CAT) — thanks to the company’s ability to dupe investors with accounting trickery during its closely followed earnings releases.

But reality cannot be ignored or covered up forever. And as a result, AA stock looks vulnerable to a decline out of the trading range that’s been in play since July. In response, I’ve recommended the March $16 AA puts to my Edge Pro subscribers.

Blue-Chip Stocks to Short — Macy’s (M)

blue-chips-to-short-m

Much has been made of the boost to consumer from the drop in energy prices. But the January retail sales report was a big dud, suggesting that households are using the drop in gas prices to rebuild balance sheets, accumulate savings, and pay down debt instead of funding a trip to the mall.

On Tuesday, M stock was hit after the company cast a pall over the future by issuing weak forward guidance on both sales and earnings. That movement pushed the March $62.50 puts I recommended to Edge Pro subscribers earlier this week to a gain of nearly 40%.

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters.


Article printed from InvestorPlace Media, https://investorplace.com/2015/02/blue-chip-stocks-to-short/.

©2024 InvestorPlace Media, LLC