Traders awoke Monday to another overnight gap. Such an occurrence has become commonplace. Headline risk is the name of the game as China and the U.S. persist in sending tariff volleys back and forth. In an environment such as this, it often pays to hold some bullish and bearish trades. That way, you carry positions that can profit whichever way the winds are blowing.
That means short selling is worth investigation. It’s a gambit that allows you to sell shares of stock that you don’t own in hopes of buying them back later at a lower price. With the epic levels of volatility seen of late, tactical traders have had many opportunities to garner gains on these bearish trades.
The best candidates are flashing downtrends and relative weakness. Couple that with a nice rally to resistance that is now failing or a support level that is on the verge of breaking and you have a nice little short trade setup.
Here are three bearish beauties to consider.
Short Trades for a Dicey Market: Alaska Air Group, Inc. (ALK)
Ever since peaking at $100 last year, Alaska Air Group, Inc. (NYSE:ALK) shares have been descending. Sentiment has soured, and bears are wreaking havoc. At $60, ALK stock is now down 40%. That’s a terrible scalp for such a short period. The trend across all time frames is pointing lower as confirmed by the falling 200-day, 50-day, and 20-day moving averages. Last week’s rally created what could be another shorting opportunity.
The $61 zone was major support, so now that it’s broken, there’s a strong chance it becomes resistance. So far this morning, ALK is showing weakness so consider that your green light to pull the trigger.
ALK does report earnings on April 23rd, so I highly recommend exiting before the event.
Short Trades for a Dicey Market: CVS Health Corp (CVS)
Weakness for CVS Health Corp (NYSE:CVS) is nothing new. The stock has been stuck in a downward spiral for two years now, shedding 44% of its value. Like ALK, CVS remains submerged beneath all major moving averages. The name of the game in this environment is to sell the rips. And, well, last week, we ripped. The 20-day moving average acted as resistance and Friday’s drop is seeing immediate follow through this morning.
With a re-test of the prior lows of $60 in the offing, now could be a good time to initiate a short trade. CVS is slated to report earnings on May 2nd, so you have about a month to play before event risk makes the position untenable.
Short Trades for a Dicey Market: FedEx Corporation (FDX)
FedEx Corporation (NYSE:FDX) shares are holding up the best of today’s short trade candidates. But the multiple support tests have me concerned. Like the rest of the market, FDX rallies continue to be swiftly rejected, resulting in multiple revisits to the 200-day moving average. Some say the more times a support zone is tested, the weaker it becomes. Such a notion certainly doesn’t provide comfort to shareholders hoping FedEx will remain aloft.
Admittedly, the next move for the stock will likely be a function of whether the S&P 500 holds above its 200-day moving average. In case it doesn’t, consider prepping an order to short FDX stock if it falls below $230.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.