Monday’s shot across the bow was the first firing of the year, and buyers everywhere are reassessing their religion. With short-term support levels now smashed and bears on the prowl, it’s a perfect time to identify stocks to sell. And so we shall.
Traders everywhere are wondering if yesterday’s whack was a single incident or a preamble to something more ominous. Pullbacks in 2019 were shallow and short-lived, requiring little conviction on the part of investors. If the market continues following the script, then the scare might be over as quickly as it began.
But it might not.
Complacency has made stocks ripe for a reckoning, and further downside could be needed before the weak hands are finally shaken out. If you believe this scenario is likely, or if you’re seeking vulnerable stocks to short, then this gallery is for you. I’ve identified three stocks on the ropes after Monday’s slide. Take a look.
3 Stocks to Sell: Boeing (BA)
Boeing (NYSE:BA) has been low-hanging fruit for short sellers ever since last March when the 737 Max woes were thrust center stage. It’s now been a turbulent ten months filled with wicked selloffs and sharp rebounds. But with buyers convictions’ waning and BA stock falling to a fresh 52-week low last week on heavy volume, the future continues to look dismal.
Earnings are slated for Wednesday after the bell and could breathe new life into the sagging share price. You’ll be forgiven for your skepticism, though. The price action doesn’t show much excitement ahead of the event.
For all of these reasons, I think bear trades on Boeing stock are still worth consideration. To provide a higher probability of profit into earnings, sell bear calls.
The Trade: Sell the Feb $345/$350 bear call spread for around 75 cents.
Sellers have been unyielding in Roku (NASDAQ:ROKU) after December’s nasty down-gap. We’ve seen five distinct advances rejected at lower prices every time. The spate of lower-swing highs has been offset by a support zone near $128 that has halted four descents. Altogether, the descending triangle pattern has set the tone for Roku’s stock chart over the past two months.
But the consolidation pattern finally declared a victor Monday, with sellers gaining the upper hand. The support breach carried ROKU to a fresh low, signaling the path of least resistance is now lower. A date with $117 looks likely, which gives us about a $10 potential profit window for the next swing.
Bear put spreads offer a limited risk path to profits.
The Trade: Buy the March $125/$120 bear put spread for around $2.40.
Our final pick is VMware (NYSE:VMW) which has been plagued by poor earnings announcements. Sellers slammed VMW shares following the past three quarterly reports. The last episode submerged the stock beneath its 20-day and 50-day moving averages where it remains to this day.
A narrow consolidation zone has formed reflecting a tight tug-of-war that (like ROKU) finally ended yesterday. The support break is being tested with this morning’s up gap, so there’s a chance it was a ruse. I like using Monday’s low as a trigger for short trades. If we take it out, a new downswing should commence.
I like bear puts for a defined risk bet if we break $145.24.
The Trade: Buy the March $145/$140 bear put for around $2.00.