Whether you’re on the left or right side of the aisle, investors are voting it’s time to find stocks to short.
Blame Monday’s failed rally on what you will. But if you need an excuse, increased tariff concerns and uncertainty surrounding next week’s mid-term elections were certainly two crowd favorites. Yet all that really matters is a nasty and bearish intraday U-turn following an out-the-gate spasm reflex to bargain hunt.
The failure by bulls to hold the line after last week’s dramatic selloff shows that the only treat for investors in the weeks ahead may be to find stocks to short that are technically poised to head lower.
Still, to avoid potential tricks in stocks that are well-oversold, investors need to be careful. Bull or bear, volatility is raging right now and deserves our respect. That’s why, after scouring tons of price charts, I’ve identified the following three stocks to short as we’ll explore below.
The first of our stocks to short in big tech is Apple (NASDAQ:AAPL). If there was ever a stock that’s sacrosanct with investors, it’s likely AAPL stock. Nevertheless, the world’s largest company reports earnings this Thursday, and the price chart hints strongly that Apple shares are forming a topping pattern.
Specifically, AAPL is setting up as a bearish head-and-shoulders pattern with a well-supported stochastics picture pointing at lower prices to come. In Monday’s session Apple shares penetrated the neckline, but did manage to rally and finish above support.
On the downside, a measured move out of the head and shoulders top should propel AAPL towards $190 to fill a bullish earnings gap from July, as well as a test of the 200-day simple moving average.
Next on our list of stocks to short in big tech is Microsoft (NASDAQ:MSFT). I’ve been a big and fairly consistent fan of MSFT stock the past couple years since shares cleared their previous highs from before the dot-com bust. The company I’ve also called Microsoft Version 2.0 has enjoyed a terrific run, but it’s now faltering and poised for a larger correction.
On the weekly price chart, MSFT has made a decisive break below the channel support line formed this year. An initial failure occurred in the first half of October. But after a mixed earnings report featuring a profit-and-sales beat but slowing growth for Microsoft’s new crown-jewel cloud-computing unit, shares hit fresh relative lows, making Microsoft one of our stocks to short.
Knowing healthier corrections in a market heavyweight like MSFT can lead to losses of up to 30% and still be regarded as normal, there’s a lot of potential in short selling shares. But in order to gain the upper hand, I recommend shorting Microsoft closer to resistance near $108 – $109.
If given the opportunity to short into a rally, I’d set a tight stop above $109.50. That would put Microsoft shares back above the trendline and post-earnings pivot high.
Big Tech Stocks to Short #3: ACN Stock
The last name on our list of stocks to short is IT-consulting outfit Accenture (NYSE:ACN). ACN stock isn’t a tech pure play like AAPL or MSFT. But as the price chart attests, shares of Accenture are shortable today.
A massive market-related price breakdown in early October sent ACN shares beneath key angular and lateral support. And ACN stock hasn’t looked back since. Accenture quickly took out its 200-day simple moving average before proceeding to form a bearish flag mostly below the key longer-term price line.
Monday’s session reaffirmed the prior week’s breakdown of the flag. And with shares just narrowly below the bearish pattern, ACN is ready for short selling today.
While ACN stock is ready for short selling today, don’t be fooled by the bearish pattern. A money stop of 5% to 6% — which puts shares back above the long-term moving average and the highs of the flag — is a sensible plan of attack. Alternatively, a smaller position and stop loss of 9% above $166 works to keep ACN stock shorts out of harm’s way.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.