With stocks flying high on the heels of a Mexico-U.S. trade deal, bullish picks are likely multiplying across the web. But we’re going to take the road less traveled with today’s gallery by focusing on stocks to sell. The reasons are simple.
First, active traders who desire to increase their quantity of trades must of necessity play the bullish and bearish side of the market. Otherwise, you end up with way too much exposure creating large fluctuations in your account value. Just think about someone who was swinging 15 bearish trades and no bullish ones last week when the market rallied five-days in a row. Ouch! By diversifying strategies you can trade more but have less risk.
Second, last week’s runup may have turned some trends higher but many remain bearish. The rally simply returned them to resistance creating compelling short setups.
Let’s take a closer look at three stocks to sell.
Canopy Growth Corp (CGC)
Pot stocks lost their mojo last month, and Canopy Growth (NYSE:CGC) wasn’t immune to the fall. CGC fell below its 200-day moving average for the first time in six months. Its descent has been long enough to reverse the 20-day and 50-day moving averages lower. Last week’s rebound returned CGC stock to potential resistance, setting up a classic swing sell pattern.
The only question is whether it will trigger. This morning’s 3.7% rally is extending last week’s gains, so I suggest waiting until the stock breaks a prior day’s low before deploying bear trades.
For now, I like using today’s low of $42.61 as the trigger. If we take it out, then consider buying Aug $45 puts. A break above $46 would cause me to change my tune.
The Uber (NYSE:UBER) IPO breathed new life into LYFT (NASDAQ:LYFT) shares last month. Since bottoming at $47.17, LYFT stock has rebounded 27%. And while I’m open to the possibility of continued strength in the stock, overhead resistance at $63 has me eyeing a bearish trade here.
The risk, if wrong, is minimal. And the potential reward is substantial if LYFT rolls over. For the first target, you can use the closest support pivot at $54. After that, $50 comes into play. Consider using a break of Friday’s low at $59.21 as your trigger.
For strategy selection, I like the Oct $60/$50 bear put spread, which currently costs $5.30.
Out of today’s selection of stocks to sell, Lowe’s (NYSE:LOW) has the cleanest swing sell setup. Its share price was slammed after disappointing the Street with last month’s earnings announcement. The high volume swoon carried LOW stock to a fresh three-month low. Since then, we’ve seen an oversold bounce returning LOW to a horizontal resistance zone and its descending 20-day moving average.
While the rebound may continue for a day or two yet, this price zone is an area to watch closely for sellers to emerge. For now, use Friday’s low ($96.70) as the trigger for bearish plays.
The Oct $95/$90 bear put spread costs $1.80 and offers a low risk way to capitalize on the next downswing.
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.