Weekly Update: Three Stealth Shorts for a Further Drawdown
As anyone keeping track of the movements of Wall Street can tell you, we saw a bit of a market correction this week.
This correction was accelerated with all the major indexes deep in the red.
As of Friday morning, the Russell 200 was down 6.7% on the week, the S&P 500 was down 4.1% and the Nasdaq was off by 5.4%.
And again, that’s just this week!
Now, it can take a few weeks for stocks to reposition themselves and come back into tight, low-risk ranges where we can buy.
And even after the market calms down, we’ll need to be patient for it to begin showing some strength again.
Switching to Short
Each index is now trading below its long-term 200-day moving average, which is certainly a bearish sign for stocks.
We are rapidly approaching the bear market threshold, and I am finding no stocks in buyable positions.
Therefore, I honestly see no reason to put money at risk on the long side under these current conditions.
So instead, I’m going to do something a little bit different…
Today, I’m bringing you three short trade ideas for anyone who may be interested in playing the other side of the market.
Charter Communications, Inc. (Short)
Charter Communications, Inc. (CHTR) is a $100 billion media conglomerate that has been trending lower since September.
Here’s how the chart is setting up:
And here’s how the stock is setting up with my Stealth System:
- Surge score: 25/100
- % Above 52-wk low: 1%
- Sales growth: +9.2%
- Triple momentum: yes (short)
A series of successive lower lows and lower highs show a textbook downtrend that will likely only accelerate under the current conditions.
The goal with stocks like this is to sell short into the bounces higher.
CHTR tends to dump off further any time it touches the 50-day moving average, so traders looking to bet against the company could consider shorting the stock on the next bounce up to the $625 area.
Be sure to use a stop, and don’t risk more than 10% on the trade.
iShares Russell 2000 ETF (Short)
The iShares Russell 2000 ETF (IWM) is the ETF that tracks the Russell 2000 Index of US listed small-cap companies and their stocks.
Here’s how the chart is setting up (Note that this is a weekly chart):
And here’s how the stock is setting up with my Stealth System:
- Surge score: 34/100
- % Above 52-wk low: 1%
- Sales growth: N/A
- Triple momentum: yes (short)
The Russell has been lagging for over a year as small-cap stocks have gone nowhere.
I’ve been watching the $208 level for several months, which was breached last week to make a new 52-week low.
Traders can consider getting short IWM here or on a small bounce up to the $205-$210 range.
Herbalife Nutrition Ltd. (Short)
Herbalife Nutrition Ltd. (HLF) is a $5 billion provider of nutritional supplements for weight management and fitness as well as cosmetic products.
Here’s how the chart is setting up (Note that this is a weekly chart):
And here’s how the stock is setting up with my Stealth System:
- Surge score: 43/100
- % Above 52-wk low: 23%
- Sales growth: -6.0%
- Triple momentum: yes (short)
Herbalife has long been a highly volatile stock, and this is the kind of name that can break down in a big way during bear markets.
The weekly chart above shows an 18-month consolidation period that broke down at the end of 2021.
HLF has bounced back over the last several weeks but continued selling across the board could send the stock on another leg lower.
Traders may consider selling Herbalife short here with a tight stop above the October highs.
Live Coaching Session
Monday, at 3:00 p.m. EDT, we’ll be hosting our regular weekly coaching session for Stealth Trades.
We’ll send you a login reminder that morning, just so you don’t forget.
We’ll cover all of our new stocks on the Watchlist as well as the rest of the stocks inside Stealth Trades.
You need to attend this session to get the most from your subscription!
In the meantime, you can watch the replay of our latest Stealth Trades session right here.
Best wishes for your trading,
Ross Givens
Editor, Stealth Trades
