Do you go short? You’ll like these ideas…
I am
not a bear or a bull. Have you noticed that?
I go long and short. Both ways.
Seeking opportunity in any instrument I have a few shorts that I will get
into right now. Two are being eyed as new positions. Two I am already involved
in and intend to enhance the position to take advantage of a greater decline.
In most cases the decline has just begun. Many stocks are indicating the
completion of top formations and are ready to take a plunge. It is what
happens at the end of a bull market. The major averages are currently
trading above key inflection points and are near yearly highs. It is out of
character that rallies persist in September. I prefer yielding to the
weakness of the season and make sure that I have some shorts in place to
counter a nasty spill if this market fails to rise above the highs made in
the first week of August. So lets get into a few shorts. I would prefer
observing markets pace of trade during the course of the day to better gauge
where I am relative to the longs in place. I especially like the action in NSM. Alongside that, NVDA. The semis, strong but mixed. The semi space is a
very good space to have money in across the spectrum. Small to large cap.
Lots of action on the long side as the potential is right there if this bull
has another rally left. So let’s get into the longs later. Now for the spicy
shorts placed on the table.
Bank of America
(
BAC |
Quote |
Chart |
News |
PowerRating) 42.56
Take my word for it. Believe
it. BAC is in decline and is presenting favorable odds to gain on the short
side. Take advantage of a stock in a slow roll down the hill to lower
elevations. Lower price points are ahead is the indication of the current
pattern of trade. It is a classic stage 4a stock. The top is complete and
the stock in decline. A drop below 42.40 will cause further weakness, as
holders will let go. Short sellers will come in and add to the pressure and
BAC after breaking support finds another old base to hang its hat on. That
would be in the 40-41 zone. It is a slow roll to lower price points. The
risk is light. Place the stop above the 200-day moving average at 45.50.
Knightbridge Tankers
(
VLCCF |
Quote |
Chart |
News |
PowerRating) 37.54
This stock is ready to go.
It is ready to cave. Take a peak at its chart and observe the drama as it
tries to hold on to lines of support that already gave way. A stock that
completes an advance followed by the formation of a top will always fight to
stay above its key inflection points. The decline begins after the break
down. This stock broke down the other day in heavy trade and those important
lines of support gave way. It is a clear sell signal. The stock can easily
fall to 30. The risk reward ratio is highly favorable relative to the short
side. I will place a new position in this instrument this morning. I will
add to it on the way down. I will begin to cover near the 30 zone. Stage
analysis is the primary approach I employ relative to the risks taken. I
like to make bigger bets in stocks that are in the beginning of an advance
or decline. The size of the bet depends on the liquidity of the instrument.
You can make bigger bets in more active instruments. This instrument trades
moderately so it is worth getting involved step by step. Place tight stops.
The risk is low because the stops are tight. Use the moving average to guide
you. It is easy to find that info. Just click on the ticker and get all the
info you really need. Stops placed in the vicinity of 40.75 for a swing.
Michaels Stores
(
MIK |
Quote |
Chart |
News |
PowerRating) 34.09
MIK is in trouble. Big
technical trouble. That is what I see when I gaze objectively at its chart.
It is in a fresh breakdown. The stock is still up over 13% this year and 19%
over the last year. The chart tells of an advance that completed in June
when it peaked at 43. Look where the stock trades today. Is it in a rising
pattern right now? It has been falling since June. It couldn’t hold its
200-day line and is trading just below that critical point right now. An
intermediate term top could lead to a short decline. How steep in a short
period perhaps another 5%. Longer term the reward could be meaningful. The
advance over the last 3 years was dramatic. This stock traded at 10 a share
in March 2003. If this bull market comes to a close then MIK, a leader in
that bull market, may fail. The chart offers evidence of that, and I am
short and will stay short as long as the stock trades below its key
inflection points. Place the stop at 38.65
The Children’s Place Retail Stores
(
PLCE |
Quote |
Chart |
News |
PowerRating) 37.65
I am short PLCE. What a cad. WOW. No emotion. Just an ice-cold view of the
chart and could care less about who they are or what they do. Don’t care to
go there. It doesn’t matter. What matters is how to extract a positive
return to build the stake. What are the best instruments to get involved in
to provide more? This little gem is a sweet short right now and could add
value to the stake. The stock had a solid advance last year. Today it is in
the beginning a decline. The top was formed over the last year beginning at
the first peak in March. Check the chart out and notice the top formed after
the first peak and a declining pattern right after it broke below all key
inflection points. The decline has just begun. The advance took it from 17
to 52. The 52 week high price occurred in March of this year. That is the
last top. That top won’t be seen again for a while. How low will it go? It
is in decline. The precise point of completion could be 36.70 or 25. If the
stock drops below 36.70 then sell it short and sell it with confidence. PLCE could be in the beginning of a nasty
decline. It’s all about performance and nothing else. That is what drives
the placing and disposing of positions. So this instrument will perform on
the dark side and I have no trouble hanging out on that side as long as it
is beneficial. Place the stop at 42.20.
Jack Rothstein
Rothstein Investment Advisory Services, Inc.
3600 Chain
Bridge Road, Suite 200
Fairfax VA
22030
Phone
888-343-4825 — Fax 703-385-7232
www.jrmoney.com — www.wealthcast.com
Jack Rothstein is the President of Rothstein
Investment Advisory Services, Inc. and is a 20-year veteran stock trader and a
money manager.
Mr. Rothstein also writes Wealthcast, a monthly newsletter about the technical
behavior of the markets. He has been quoted on Bloomberg, CNNFn, the Dick
Davis Digest and the Dow Jones Newswire. Since 1993, Mr. Rothstein also hosted
WealthCast, a radio show in the Washington DC area covering the stock market.