Bearish Bets: 3 Stocks to Short on Textbook Downtrends
Welcome to another edition of TheStreet Pro’s Bearish Bets, our weekly feature where we identify three stocks that look bearish from a technical perspective and may present interesting investing opportunities on the short side.
While we will not be weighing in with fundamental analysis on these issues, we hope this piece will give investors interested in stocks on the way down a good starting point to do further homework on the names contained herein.
Nektar Breaks the Downtrend Channel and May Build a New One
A series of lower highs, lower lows in a stock chart is our textbook definition of a downtrend. If we are trying to find support, looking back at previous price action gives us an opportunity to find spots where a bounce or rally may occur. Unfortunately for Nektar Therapeutics ($NKTR), that area is much lower. The market conditions are poor and when that happens to a bearish chart it means more pain.
Take a look at the indicators.
A bearish crossover in the MACD (moving average convergence divergence) just when the downtrend channel was being established. Serious selling shows up in money flow, and RSI (relative strength index) is right near oversold, which is not a buy.
We see some good support way down at the February lows at the $34 level. That would be a huge profit objective but may take some time. Put in a stop at $60 just in case.
No Chance for Progress Software
As mentioned above, a downtrend channel of lower highs and lower lows is our textbook definition of a bearish move. You cannot dispute the bearish condition for Progress Software ($PRGS) here, as the MACD also is on a bearish crossover and money flow is negative. RSI is trending lower but is not quite at an oversold reading yet.
Could the stock bounce here? Certainly, and in a few days Progress should be oversold enough, but that would be another short opportunity. There is minor support in the $27-30 range, but that may not hold as the April lows are $24.
When a stock breaks like this one we often see a move down to a reactionary low. Let’s target $27 first, putting in a stop at $42 just in case.
Acuity Gets Beaten Up After Poor Earnings
We saw earnings this past week from Acuity Inc. ($AYI) and they were ugly. But if you look at the chart you see why and where the ugliness started.
The stock has been in a defined downtrend for weeks, with lower highs and lower lows. This continues to define the price action until a more certain low is tested. That does not seem to be achievable here until around the $260 area, a pretty strong move down from current levels.
Money flow is bearish, MACD is on a sell signal while RSI has made lower highs and lower lows.
Let’s target that March low around $260-262, and put in a stop at $311 just in case. This chart is very bearish and does not seem to have much support in place.
