There’s nothing like a six-day rally to invigorate the masses.
With every major market index back above their respective 50-day moving averages — and some now a stone’s throw from record highs — bulls have once again wrested control. Optimists will say order has been restored and high prices lie in wait. While I tend to agree, it’s worth noting not all stocks are being buoyed by the newfound strength.
Today, we’ll look at a trio of stocks that remain under pressure and are prime candidates for bear trades.
Their trends remain lower, and resistance aplenty looms overhead. If the market suffers a pullback to digest last week’s rally, these stocks could be the first to drop. So buckle up, cue your inner short-seller and prep bear trades on these stocks.
3 Weak Stocks Begging for Bear Trades: Altria Group Inc (MO)
Altria Group Inc (NYSE:MO) shares lead the pack with one of the weakest charts on the board. With last month’s mega-drop, MO stock is now down 23% year-to-date. That’s some relative weakness! Its price is trending beneath a falling 20-day, to-day, and 200-day moving averages which reflects bears are dominating across all time frames.
Since the April drubbing, Altria Group stock has been unable to get off the mat. Instead of popping back, it’s been slithering sideways forming a low base pattern. And with the 20-day moving average now caught up, the time for its next descent is nigh. Consider deploying bear trades on a break of the $54.60 support level.
Buying the July $55/$50 bear put spread should do the trick.
3 Weak Stocks Begging for Bear Trades: Goldman Sachs Group Inc (GS)
Goldman Sachs Group Inc (NYSE:GS) shares recently completed a complex topping pattern with a high volume breach of significant support and the 200-day moving average. Last week’s rebound ushered the investment bank back to the scene of the crime. At $245 we’re now testing the underside of support in a bid to reverse the breach. This is a critical juncture.
If GS can sail back above the old floor, then it’s game on for buyers. But if it doesn’t, if old support becomes resistance, then this is a low-risk spot to deploy new bear trades. Look for a break below Friday’s low ($241.71) to confirm the new downswing has begun.
With an IV rank of 14%, GS stock options are dirt cheap. Consider buying puts to capitalize if the setup triggers.
3 Weak Stocks Begging for Bear Trades: Eaton Corporation PLC (ETN)
Our final pick hails from the Industrial sector which is flashing relative weakness. Eaton Corporation PLC (NYSE:ETN) slipped into a downtrend after a sharp bout of profit-taking post-earnings in February and has yet to right the ship. Its last downswing formed a lower pivot low showing a continuation of the descent.
And that means, despite last week’s valiant rebound, ETN stock remains in a downtrend. If anything, the rally makes the Eaton Corporation that much more attractive as a shorting candidate since it’s now wrestling with resistance.
If ETN breaks Friday’s low ($76.06), bear trades are worth a shot. Consider the July 75 puts.
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.