Less sure trading conditions in the broader averages have left some investors only familiar with the buy button at a loss for what to do this week. But when it comes to some of the market’s more notorious and familiar most-shorted stocks, bears have been unseasonably hard at work.
Last week’s terrific start to November to all-time-highs and follow-through to October’s unusual and quite strong gains have been tempered. Call it a case of profit-taking in the major bellwethers.
And with the likes of the leading Nasdaq pulling in by about 0.85% in inside candlestick conditions this week after gaining 3.05% over the prior five-day period and 7.27% in October, profit-taking sums it up better than any headline ever could.
But not in some of the market’s more familiar and well-traded most-shorted stocks, similar even-keeled action has been M.I.A.
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From investors being enlightened or rather tortured by earnings, insider sales or maybe a disappointing drug trial and that sort of thing, fast-hitting declines of 15% or more are obviously more than just run-of-the-mill profit-taking. But is it the start of something more ominous?
Today let’s take a look at three of these most-shorted stocks, the reports driving shares aggressively lower and whether the action poses an opportunity for bulls—maybe a need to pull up camp or even consider playing for the other team.
Most-Shorted Stocks Making News: Beyond Meat (BYND)
Source: Charts by TradingView
The first of our most-shorted stocks that’s been bloodied this week is Beyond Meat. The plant-based meats upstart delivered a less-than-savory looking earnings report.
The company’s third quarter featured a much wider-than-forecast loss, higher costs, light and weaker sales and reduced guidance for Q4. Yuck!
The release proved a recipe for BYND’s resident bear population of 28% to sink their teeth into with shares sinking 16% to their lowest levels in since April 2020.
CEO Ethan Brown proffered Beyond Meat remains committed to its long-term strategy and is upbeat on new product launches next year despite recognizing the current challenging environment.
However, if investors are looking at this most-shorted stock as one that’s been over-cooked, don’t be too quick to act.
Technically and as the illustrated monthly chart reveals, this most-shorted stock is currently testing neckline support as part of a bearish head and shoulders topping pattern.
With the challenge lining up with the 76% retracement level and stochastics weakening over the course of the H & S’ development, a failure indicates shares of this most-shorted stock making their way back to BYND’s lows near $45 – $50.
At a minimum, bulls need to step to the side until conditions indicate otherwise on the monthly or use an out-of-the-money bull put spread as a limited-risk alternative to buying shares on weakness.
Source: Charts by TradingView
FuboTV is the next of our most-shorted stocks that’s been punished by an earnings report and much to the delight of FUBO’s short interest of about 21%.
This week the under bet in FUBO stock has paid off to the tune of nearly 25%. But don’t think for a second that fuboTV bulls are like hapless Jets fans.
Unlike BYND stock, FUBO delivered a trifecta in which the livestreaming sports outfit topped the street’s top and bottom-lines, as well as produced a larger-than-forecast increase in paid subscribers.
So, what’s behind the weakness in this most-shorted stock?
There is some concern FuboTV’s sports betting operation that’s just underway is going to be ‘difficult to scale.’ Bears may also see the platform’s video service as an eventual bust. Bear talk, right? Yup.
Still, even if you’re inclined to disregard what short seller LightShed Partners has to say about this most-shorted stock, the bulls have fumbled on the price chart. And I wouldn’t be wagering for a quick recovery anytime soon.
Technically, what had been a struggling corrective base with shares attempting to clear the 38% retracement level has turned into a confirmed double-top pattern.
Further, with a bearish stochastics crossover just dropping into neutral territory, it’s the bears’ ball to loose right now in FUBO stock.
I’m optimistic that can happen sometime in the fourth quarter, but there’s no need to rush a long position in this most-shorted stock until price and stochastics confirmation on the weekly chart can back the offensive play.
Most-Shorted Stocks Making News: Tesla (TSLA)
Source: Charts by TradingView
The last of our most-shorted stocks sliding after news this week are shares of Tesla. At around 4% short interest, the percent of bears in TSLA stock isn’t large. But the near $26 billion wagered remains the most significant dollars at risk in today’s stock market.
Today those bears are breathing a bit easier. TSLA stock has tumbled 16% over the five-day period following reports CEO Elon Musk will sell 10% of his stake after putting the decision to a vote on social media.
But don’t bet against the Tesla bulls on this one.
With the this most-shorted stock’s sale linked to a tax burden and insider sales in general meaning much less than insider purchases, don’t expect the news to have staying power with today’s sellers and bears.
This upbeat view is also reinforced by a TSLA price chart still controlled by the bulls.
Technically, the monthly view of TSLA shows a pullback that’s challenging zone support after striking all-time-highs out of a larger corrective cup-shaped base.
The area from roughly $900 to $1,000 is backed by the 38% retracement level tied to Tesla’s bear cycle bottom from this summer and the cup’s former high.
Along with price action in this most-shorted stock reflecting a fairly benign uptrend and shares sporting a bullish monthly stochastics setup, a test drive or longer-term parking in TSLA stock makes sense as part of a long hedged trading strategy.
On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.