The long-awaited and desperately needed rebound has arrived. And boy, has it been epic. Before you plunge back into the pool, realize not all stocks are on equal footing. Those that trashed their uptrends by smashing critical support zones are all potential stocks to sell into the strength.
This bounce could be one of the dead-cat variety. Said another way, it might be a ruse, a trick designed to sucker in bulls before sellers swarm and we crash anew.
Chart watchers familiar with the principle of polarity know that all prior support zones are now potential resistance areas on the way back up. And that could stymie the snapback as it heads into its third day.
I’ve scoured my watchlist and found three particularly vulnerable stocks to sell. Let’s take a closer look.
Exxon Mobil (XOM)
Energy stocks are loathed on the Street. But this isn’t new! They’ve been hated for years, which has probably made them one of the logical areas to abandon during last week’s liquidation. And as the biggest player in the space, Exxon Mobil (NYSE:XOM) has been one of the easiest targets for short-sellers to prey on.
The drop has ushered XOM stock back to the depths plumbed during the 2008 bear market. As a result, its dividend yield has zipped to a beefy 6.57%. Exxon broke multiple multi-year support zones over the past month and now has massive potential resistance overhead. As its rally pushes to the upper $50s, I suspect sellers will return.
Watch for evidence of a downside reversal in the $56-$59 area, then deploy bear trades.
Boeing (BA)
Despite the neverending 737 MAX saga, Boeing (NYSE:BA) shares have been able to hold the lower end of their massive sloppy trading range (call it $320) for months. And this has been despite multiple breakdown attempts. But buyers resolve finally faltered during last week’s crash.
With Boeing stock now on the underside of a long-lasting consolidation area, it’s going to be a challenge to power back above the $320 area. Minor support zones turn into minor resistance zones. And major support zones become major resistance zones. That’s my concern with Boeing moving forward and why it’s one of the better stocks to sell into this rebound.
Watch for evidence of a downside reversal in the $305-$320 area, then deploy bear trades.
Goldman Sachs (GS)
The financial sector wasn’t spared during last week’s plunge. It fell 17.2% from its peak before the rebound finally arrived. Goldman Sachs (NYSE:GS) fell out of bed along the way, slashing through its 50-day and then 200-day moving averages. The story and pitch for fading Goldman’s strength are the same as its predecessors. Critical support zones have failed, and its weekly trend now points lower.
And that makes me suspicious of the rally. A push to the 200-day near $215 is where I’d begin watching for signs of sellers and mapping out bear trades. For Goldman Sachs as well as XOM and BA, I like buying bear put spreads out to May or June.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. For a free trial to the best trading community on the planet and Tyler’s current home, click here!
