- Growth stocks are continuing to decline as sellers hit the market.
- Rivian (RIVN) shares slumped to a record low on Tuesday amid widespread carnage in growth stocks.
- The selling pressure also pulled Roblox (RBLX) to new depths with an 8.2% loss on the day.
- Roku (ROKU) toppled 10% after cracking the psychologically significant $100 level.
Growth stocks continue to shrink. On Tuesday, the latest blow came when sellers flooded the market, sending the Nasdaq down nearly 4%. Volume ballooned past 100 million shares to confirm institutions were abandoning ship. As has been customary for the past six months, high-beta growth stocks bore the brunt of the damage, with many falling twice as much as the Nasdaq. Worse yet, many are cracking critical support levels, suggesting more pain is in store. I’ve surveyed a lengthy list of the hardest hit and found three deplorable worth selling before things get worse.
And, yes, I realize how it might seem when we’re joining sellers in stocks that are already -75% to -85% off their highs. But if history has taught us anything, stocks can sink much further than you think before a bottom is finally found. Besides, you can always get back in later if the trend reverses higher and the technicals brighten.
Among Tuesday’s biggest losers, I found three popular names that look vulnerable to more downside. And that makes them tempting targets for bear trades.
| Ticker | Company | Price |
| RIVN | Rivian | 31.31 |
| RBLX | Roblox | 30.70 |
| ROKU | Roku | 87.42 |
Growth Stocks to Sell: Rivian (RIVN)
Rivian (NASDAQ:RIVN) stock has a lot of strikes against it. First, it’s a recent IPO that hasn’t yet reached its first birthday as a public company. It doesn’t have the time or history behind it to acquire sizeable institutional ownership. Second, it’s a high-beta growth stock in a market where investors hate both high beta and growth. Third, it’s unprofitable. In a low interest/low inflation rate environment, unprofitable companies can have a long runway. This is no longer one of those markets.
Inflation and interest rates are going through the roof, and investors prefer profitable, stable businesses that are returning cash to shareholders now. Rivian is doing anything but.
Of course, the price chart of Rivian is sending the clearest signal of all. It’s in a nasty downtrend and just broke support. There isn’t a single soul on the planet who purchased the stock after its IPO that has a profit. So we have an army of underwater longs desperate to get out at higher prices. To capitalize on lower prices, consider buying put spreads.
The Trade: Buy the June $30/$20 put spread for $3.60.
Roblox (RBLX)
Unfortunately for Roblox (NYSE:RBLX), it’s fighting the same headwinds as Rivian. It IPO’d last year, has four straight quarterly losses, and belongs to the same group of high-beta growth stocks.
Last week RBLX stock sliced through the old significant pivot at $36, and we’ve seen nothing but downside follow-through since. The 200-day, 50-day, and 20-day moving averages are all declining. Shares closed at an all-time low Tuesday, bringing the same bearish implications as highlighted with RIVN. Namely, everyone is losing money.
You should steer clear until the market sentiment shifts, and buyers start warming to growth stocks. In the meantime, if you want to bet on the trend continuing, then put spreads offer a cheap bet.
The Trade: Buy the June $30/$20 put spread for $3.30.
Growth Stocks to Sell: Roku (ROKU)
Roku (NASDAQ:ROKU) rounds out today’s growth stocks to sell with an equally dismal chart and story. The biggest differentiator from a fundamental perspective is that the streaming device maker actually makes money. It also has a longer history as a public company after IPOing in 2017. Not that either fact has made much of a difference in price performance.
Bears have been just as aggressive in dismantling its share price, and it boasts a drawdown as despicable as its predecessors. The next earnings report is right around the corner on April 28, and shareholders are hoping for a miracle to spur a turnaround. I wouldn’t get your hopes too high, though. Earnings season has been a dud so far, with very few companies gaining ground after their releases.
ROKU stock is also not for the faint of heart. It still has an average true range (ATR) of $8.37, so we’re currently seeing nearly 10% daily moves. If you’re willing to lean short into Thursday’s event, here’s a limited-risk way to do it.
The Trade: Buy the June $90/$70 put spread for $8.
On the date of publication, Tyler Craig 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.
