Today’s screen locates stocks that may become longer term short candidates based on the direction and action of their major moving averages. They are all trading below their 200-day moving averages after reaching a new high within the past 6 months or so. This type of action has historically tipped off a longer term downtrend that may be in the stock’s future. As some of you know, I prefer to use options to capitalize on downtrends rather than shorting the stock outright.
See my posts below to understand exactly what I am looking for when placing a short trade or buying put options several months out.
- Setups for Selling Stocks Short
- Stages of a Stock Breakdown
- 10-Week Crossing Below 30-Week Moving Average
Stocks Starting to Trend Downward:
- PCP – 110.69, Precision Castparts Corp. is trending lower as the stock is challenging (to move above) the 200-d m.a. for the first time since crossing below the average in January. The stock does sport a 10-week m.a. below the 30-week m.a.
- GME – 47.38, Gamestop Corp was screened back in March as a stock setting up a possible short but it had one last push before starting to crumble again. Now is the more ideal entry area for a short or put options based on the 200-d m.a. and the 10/30-week crossover.
- VOD – 30.10, Vodafone Airtouch is attempting to challenge (move above) the 200-d moving average but doesn’t seem to be having success. The 10-week m.a. is trading below the 30-week m.a.
- GR – 57.96, Goodrich Corp. is down more than 10% this week on large volume as the 10-week m.a. also trades below the 30-week m.a. A drop below $56 would violate all recent support.
- LLL – 101.90, L-3 Communications is down more than 5% this week on above average volume as it violates the 200-d m.a. (for the second time since 2006). The 10-week m.a. is still above the 30-week moving average so I would not short the stock until they cross.
- GOLD – 41.14, Randgold Resources, has started to pullback and violate the 200-d m.a. for the first time since the summer of 2007. It may be early to short for the long term but keep an eye on this stock and the commodity in general. The 10-week m.a. is still above the 30-week m.a. (10-week moving average is now trending downward).
- TEF – 83.21, Telefonica is about six months removed from its high as it trades beneath its 200-d m.a. for the first time in years. The 10-week m.a. is now trading below the 30-week.
Please note that it is still early for a few of the names above (they may have some life left for a bounce higher before a longer term decline).
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