Large-caps are trying to maintain the company line. But elsewhere in the market, it’s not exactly the Roaring ’20s Version 2.0 these days. And when it comes to today’s most-shorted stocks, it’s time to combine the two for a winning trade.
Entering Friday’s session and December is off to a fragile-looking start in the large-cap, broad-based S&P 500. The bellwether is off an innocuous 0.05% with the month just underway. But that’s far from the whole story.
Following a very joyful and historic rally over the past 20 months since Covid’s sweeping March 2020 bottom, conditions are a bit dicier for bullish investors to say the least.
Prices based on a bevy of indicators are at extremes and ripe for contraction. And technically, the S&P 500 has confirmed a bearish topping candle on the monthly time frame.
Also, and as is often the case, smaller capitalization companies have been taking the lead in recent days and showing a bit less resistance to this century’s go-go investing craze.
Today, I say if you can’t beat them, join them. And that means positioning as a bear in mid-caps which have the added backing of being among the market’s most-shorted stocks, along with price patterns built for capturing downside profits.
Bearish Most-Shorted Stocks: FuboTV (FUBO)
Source: Charts by TradingView
The first of our most-shorted stocks to be wager bearishly on is FuboTV.
Last month the livestream sports platform announced a terrific-sounding report. But bullish investors wanted nothing to do with it. In fact, they trampled over themselves attempting to exit.
FUBO stock cratered 23% in the immediate aftermath and has continued to retreat aggressively lower.
Obviously, this most-shorted stock has been anything but run-of-the-mill profit-taking. So, what gives?
It might have something to do with short-sellers like LightShed Partners wagering FuboTV’s sports book business will be hard to scale up and its video service as one doomed for failure.
Today, the monthly price chart is also throwing the penalty flag favoring the bears.
Technically, December’s price action has confirmed the prior month’s engulfing and higher volume double-top pattern.
Along with a well-positioned bearish stochastics setup, the activity in this most-shorted stock is hinting strongly that FUBO’s Fib-based Gartley pattern which completed in May, is increasingly at risk of a full-blown failure.
All told and given the game’s more bearish macro conditions, it’s time to suit up with a strong defense and offense using a January $16/$12.5 FUBO bear put spread.
Beyond Meat (BYND)
Source: Charts by TradingView
Beyond Meat is the next of our most-shorted stocks to side with the bears.
As much as I’m a fan of the company’s faux meat products and their health and environmental benefits, BYND shares at this juncture are only going to continue making bears feel satisfied financially.
Following a recent and mostly awful earnings report, the bears have mounted a successful campaign to confirm a very bearish-looking head and shoulders pattern.
With this entry traders are playing a trend in motion that’s likely to stay in motion with no technical support in BYND stock until it challenges its all-time-low of $45.
Bottom line and given today’s price tag near $65, there’s some fat on this turkey to be devoured by bearish investors with a well-placed February $60/$45 bear put spread.
Bearish Most-Shorted Stocks: Macy’s (M)
Source: Charts by TradingView
The last of our most-shorted stocks to be bearish on are shares of Macy’s.
The iconic department store operator may not look like one of the market’s most festive and ballooned valuation stocks. And it’s not.
But the bull’s parading hasn’t been lost on M stock either and today that’s looking problematic.
Shares of this most-shorted stock are up nearly 140% in 2021 compared to the S&P 500’s gain of about 21% and mid-caps which are trailing the procession at just 10%.
Behind the performance in M stock there’s seemingly some terrific reasons to capture Wall Street’s attention and dollars.
Most recently, a couple weeks back Macy’s delivered nothing short of an across-the-board, crowd-pleasing earnings beat, and complete with a sunny forecast of more parading to come.
But today’s price chart is warning that profit-taking following the report is shaping up as a larger bearish cycle.
Technically, this most-shorted stock has narrowly confirmed a bearish shooting star monthly chart pattern with December’s retreat beneath the candle’s low of $26.62.
And with the 50% and 62% retracement levels fending off bullish investors and stochastics signaling a bearish crossover in overbought territory, growing short interest of around 16% appears to be on the right side of trade.
For positioning, an intermediate-term, out-of-the money bear put spread which capitalizes on a challenge of Fibonacci and prior downtrend resistance near $15 – $17 in this most-shorted stock looks about right.
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.
