Traders hoping for a sharp “V”-shaped recovery were sorely disappointed on Friday. The markets’ winning streak ended at three days and placed indexes on precarious footing heading into the new week. Couple that with this morning’s weak open and we have a backdrop that seems to favor finding stocks to sell.
Fortunately, my weekend surveying revealed a handful of candidates. Their charts are littered with evidence that bears maintain control and are positioned to continue dominating this week. Price trends are pointing lower. Moving averages of all time frames are falling. Distribution days pockmark the volume indicator.
And, perhaps most importantly, all three of today’s stocks to sell candidates boast low-risk entries near resistance. Let’s take a closer look.
3 Stocks to Sell for Big Profits: Boeing (BA)
Boeing (NYSE:BA) was able to cobble together a rare four-day winning streak last week that returned the troubled airplane maker directly to the scene of its earlier breakdown. The importance of the $360 zone can’t be overstated. It’s the location of an old, significant support level, as well as both the 200-day and 20-day moving averages.
The confluence of potential resistance will make it challenging for BA stock to break back above that level. If anything, last week’s rebound is setting up an attractive opportunity to deploy bearish trades for those willing to bet the downtrend isn’t over.
To capitalize on its next descent, buy the June $355/$340 bear put spread for $5.90. The risk is limited to $5.90, and the reward is $8.95.
IBM’s (NYSE:IBM) rousing 2019 recovery was cut short last month after the company reported disappointing earnings. Since then, sellers have dominated and pushed its shares back below the 200-day moving average. Last week’s three-day rally did little to change the big picture, acting instead as a dead-cat bounce. It created a more attractive entry for new bear trades.
Friday’s slip and this morning’s downside followthrough confirm sellers are still in control while signaling the next downswing is upon us. Further weakness should carry IBM stock back to $130 in the coming weeks.
Here’s an option spread with the potential to double your money. Buy the July $135/$130 bear put spread for $2 or less. If IBM sits above $135 at expiration, you will lose the $2 paid. But if it can fall below $130, you’ll gain $3, or roughly 150% of your original investment.
Ever since its IPO, Lyft (NASDAQ:LYFT) shares have had an anvil tied around their ankle. The descent has proved inescapable and provided multiple entries for short-sellers. One such setup is beckoning right now. Last week’s three-day pop buoyed LYFT stock into its descending 20-day moving average, creating a low-risk setup for spectators looking to play the downtrend.
Look for the stock to re-test its pivot low at $47. Consider that your first downside target. Buy the Jul $50/$45 bear put spread for $2. Your risk is $2, and the reward is $3.
As of this writing, Tyler Craig didn’t hold a position in any of the aforementioned securities. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.