Each week we identify names that look bearish and could present interesting investment opportunities on the short side.
Using technical analysis of those stocks’ charts, and, where appropriate, recent actions and grades from TheStreet’s Quantitative Ratings, we’ve zeroed in on three names.
While we won’t be going into fundamental analysis, we hope this piece will give investors interested in stocks a good start on the way down to doing more homework on the names.
Dollar Tree For Sale
Dollar Tree Inc. was downgraded. (DLTR) was recently rated Hold at C+ by TheStreet’s Quant Ratings.
This discount retailer turned around very quickly. In fact, we could see a quick move down to the May lows before too long. Volume trends were off the charts last month, and now with lower highs and lower lows Dollar Tree is at more downside risk. That huge gap is emerging and support may be around $125.
With the stock in the high $130s there is some opportunity here. Cash flow is poor and moving average convergence divergence (MACD) is on a double sell signal. Set a target price of $120, stop at $150 just in case.
Exelixis is not great
Exelixis Inc. was downgraded. (EXEL) was recently rated Hold with C+ by TheStreet’s Quant Ratings.
Oncology-based biotechnology has fallen by heavy volume. Cash flow is showing strong outflows and the Relative Strength Index (RSI) is bending lower at a steep angle, which tells us that this stock is performing significantly worse than the rest of the market.
Although the May support is right at current levels, the momentum to drive prices lower is still quite strong. The cloud is also red, the 20-day moving average is bending lower for little reason. Look for a move down to the low teens, stop at $19.
Sags Standard Motor Products
Standard Motor Products Inc. became (SMP) was recently downgraded to a C+ rating by TheStreet’s Quant Ratings.
The automotive component maker’s chart is dire. This stock is not a bad buy. It’s just a disaster. It is good to play bearish or short, however, with weak cash flow and the RSI bending lower at a steep slope.
The cloud is red and opening wider, telling us that the no-buy zones are expanding. Look at the size in August – it’s all distributed and very heavy. If short, aim for the low $20s, but stop at $39 just in case.
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