Bulls are celebrating last week’s successful test of the 200-day moving average in the S&P 500. And, I suppose, their celebration is warranted. But this week, there will be plenty of stocks to short.
The trouble with pulling out the pom-poms and joining the revelry is that heavy resistance looms overhead. A successful support bounce must be followed by an upside breakout to be a consolidation-ending event. Otherwise, the chop continues.
My weekend scanning yielded a trio of stocks whose rallies appear destined to fail. Two of the three are locked in downtrends with a long history of failed bounces. The third is stumbling after earnings and boasts a chart with deteriorating technicals.
If you’re seeking bear chow, these stocks are on the short menu.
3 Stocks to Short for Bears: Paypal Holdings Inc (PYPL)
Ever since losing the high ground following last quarter’s earnings release, Paypal Holdings Inc (NASDAQ:PYPL) has been stuck in the mud. Souring sentiment in tech stocks hasn’t helped matters either.
Shareholders hoping for last week’s earnings announcement to breathe new life into PYPL stock were sorely disappointed. The market’s response was a yawn, and now the stock is testing the lows of its triangle pattern.
While today’s rally shows Paypal stock may not be ready to give up the ghost yet, it’s worth watching for a breakdown below $72.50. A swift move towards the next support level at $69.50 would be in order after that.
3 Stocks to Short for Bears: Campbell Soup Co (CPB)
Campbell Soup Co (NYSE:CPB) shares should be no stranger to short-sellers. Bears have been hounding CPB for years now. At $41.53, Campbell’s has fallen 39% off its 2016 highs. This has happened, mind you, while the rest of the market has been flying sky high.
The 200-day, 50-day, and 20-day moving averages are all careening lower showing sellers’ dominance across all time frames. Last week’s rally ushered CPB back to its 20-day moving average which is an area that has rejected many past rebounds.
Today’s selling is forming a bearish engulfing candle showing bears aren’t wasting any time shoving CPB back into the abyss.
Look for a retest of the lows at $39.76 in the coming days.
3 Stocks to Short for Bears: Kimberly Clark Corp (KMB)
Kimberly Clark Corp (NYSE:KMB) shares have one of the best swing setups on the board this week. Its trend is down, yes, but it’s also increasing in momentum.
Selling pressure shot through the roof during the last drop as shown by the rise in volume and volatility. As is often the case, an oversold bounce finally took root once prices reached max pessimism.
And that brings us to today’s opportunity. KMB has now returned to overhead resistance in the form of old support and its falling 20-day moving average. If you believe the pain will keep on coming for Kimberly, then this is a low-risk entry for new short trades.
Use $97.50 as your downside target.
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.
