Weekly Update: Three Stealth Shorts for a Further Drawdown

Ross Givens Ross Givens on January 21, 2022

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:

Daily Chart of Charter Communications, Inc. (CHTR) — Source: TC2000

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):

Weekly Chart of iShares Russell 2000 ETF (IWM) — Source: TC2000

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):

Weekly Chart of Herbalife Nutrition Ltd. (HLF) — Source: TC2000

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

Weekly Update: Bull Storm Into 2022 at Record Highs

Ross Givens Ross Givens on December 31, 2021

US markets ended the year on a high note, to be sure.

The benchmark S&P 500 index broke above the 4,800 level this week for the first time ever.

It’s now approaching a 30% gain for the year.

And it’s a similar figure for the Nasdaq 100.

But zooming out to a wider range of smaller stocks, the Russell 2000 index is up only about half that amount for the year at 16.5%.

That’s still a respectable gain, and it’s been a great trading range over the past year with a lot of opportunities.

But it points back to what I’ve been telling you lately…

The performance of large-cap and mega-cap stocks is masking a stealth correction throughout much of the market.

Yes, there will be plenty of great trading opportunities in 2022… And I’ll be here alerting you to many of them.

But I continue to recommend cautious trading because I don’t want you to get complacent as we head into the new year.

With that in mind, let’s get right to this week’s Watchlist stocks…

Lee Enterprises, Inc.

Lee Enterprises, Inc. (LEE) is a small, $232 million publishing company that produces print and digital newspapers and provides advertising and marketing services.

After surging 119% in 22 days, I put LEE on the Watchlist last week.

Here’s how the chart is setting up:

Daily Chart of Lee Enterprises, Inc. (LEE) -- Source: TC2000
Daily Chart of Lee Enterprises, Inc. (LEE) — Source: TC2000

And here’s how the stock is setting up with my Stealth System:

  • Surge score: 99/100
  • % Above 52-wk low: 235%
  • Sales growth: +1%
  • Triple momentum: yes

It also met the criteria for a “high tight flag.”

Since then, the stock has stayed within its retracement zone, so I’m going to keep it on our list to see if it can break out higher.

Ideally, we want the stock to stay in the “flag” portion for two to three weeks or more.

This way we can make sure the profit-taking has been absorbed.

Typically, traders use the low of the retracement zone as where to place a stop loss.

But if price continues to tighten, you could use the swing low of the final retracement.

Alphabet Inc.

Alphabet Inc. (GOOGL) is the 1.9 trillion parent holding company for technology platforms Google, Android, YouTube and many other leading tech brands.

The fact that a nearly $2 trillion company is still growing sales by 41% per quarter is mind-blowing.

Here’s how the chart is setting up:

Daily Chart of Alphabet Inc. (GOOGL) -- Source: TC2000
Daily Chart of Alphabet Inc. (GOOGL) — Source: TC2000

And here’s how the stock is setting up with my Stealth System:

  • Surge score: 92/100
  • % Above 52-wk low: 70%
  • Sales growth: +41%
  • Triple momentum: yes

The company grew profits by 99%, 189% and 82% in the last three quarters, respectively, showing there may be no limit to how big Google can become. 

Shares have been consolidating for the last few months, and we now have a tight pivot range where we can buy to risk just 6% on the trade.

Driven Brands Holdings Inc.

Driven Brands Holdings Inc. (DRVN) is a $5.6 billion automotive services provider for retail and commercial customers.

It does paint and body work, repairs, oil changes and other general services, and it is also a distributor of various aftermarket auto parts.

Here’s how the chart is setting up:

Daily Chart of Driven Brands (DRVN) -- Source: TC2000
Daily Chart of Driven Brands (DRVN) — Source: TC2000

And here’s how the stock is setting up with my Stealth System:

  • Surge score: 87/100
  • % Above 52-wk low: 49%
  • Sales growth: +39%
  • Triple momentum: yes

As a stock, DRVN is a recent initial public offering (IPO) trying to complete its first base as a public company.

The stock tried to break out earlier this month, but it appears to be finding sellers near the $34 area where the stock peaked back in January.

If we can get through that area into new high ground, there is a good chance the stock will run higher.

Last week’s low needs to hold in order for this to remain a low-risk trade, however.

If the stock breaks down, I will wait for a new entry point.

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

Weekly Update: Why Managing Risk is Crucial Right Now

Ross Givens Ross Givens on December 17, 2021

Is this the start of a real market downturn?

Maybe it is… Maybe it’s not. 

As I’ve noted recently, the market has been extremely weak under the surface for months now…

And it’s certainly possible that the indexes and big name technology stocks could finally succumb to that and head lower.

We’re not seeing that happen just yet, as the S&P 500 index is only off of its all-time high by about 2%.

But the fact is that most breakouts are not working right now.

Instead of seeing the follow-through move we would normally expect, breakout stocks are getting sold off before they’re able to gain any real traction.

The stocks are sound, and the setups look good. But it seems to me that institutions are selling into the strength.

Now’s the Time to Manage Risk

I don’t mean for this to sound scary, but I would not be upset to see a 10%-20% correction to “reset” the market.

This would set up a lot of fresh new opportunities and clear the way for another leg up on this bull market.

For now, we’ll continue to abide by our trading rules for the new Watchlist stocks below.

However, you always want to be aware of how much risk you’re taking.

If you feel uncomfortable with this kind of up and down volatility, consider using smaller position sizes or setting tighter stops.

And when markets are shaky, don’t hesitate to take some profits and lock in a gain if you have one.

JB Hunt Transport Services

JB Hunt Transport Services (JBHT) is a $21 billion logistics services company focused on trucks and transporting stuff via those trucks.

And as you know, moving stuff via trucks is a major market in high demand right now.

Here’s how the chart is setting up:

Daily Chart of JB Hunt Transport Services (JBHT) -- Source: TC2000
Daily Chart of JB Hunt Transport Services (JBHT) — Source: TC2000

And here’s how the stock is setting up with my Stealth System:

  • Surge score: 91/100
  • % Above 52-wk low: 46%
  • Sales growth: +27%
  • Triple momentum: yes

After a healthy run in the first half of the year, JBHT has taken a breath to consolidate near the $200 level.

A shakeout move down to $185 likely hit some stops, so the stock should be even further consolidated into stronger institutional hands.

Look to buy on a breakout to new high ground.

Republic Services, Inc.

Republic Services, Inc. (RSG) is a $43 billion waste management company focused on serving municipal and residential customers.

The other side of the business processes and sells cardboard containers, newsprint, aluminum, glass and other materials.

Here’s how the chart is setting up:

Daily Chart of Republic Services, Inc. (RSG) -- Source: TC2000
Daily Chart of Republic Services, Inc. (RSG) — Source: TC2000

And here’s how the stock is setting up with my Stealth System:

  • Surge score: 93/100
  • % Above 52-wk low: 57%
  • Sales growth: +14%
  • Triple momentum: yes

Sales growth of 14% isn’t huge for most companies. But in the waste management sector, it is fairly substantial.

After a one-day pop higher on big volume at the end of October, RSG has tightened into a low-risk 5% range.

RSG broke out of two similar bases this year, each leading to solid short-term gains.

Intercontinental Exchange, Inc.

Intercontinental Exchange, Inc. (ICE) is the $76 billion operator of market exchanges, clearing houses and listings venues that some of you have likely heard of or even traded with before.

Here’s how the chart is setting up:

Daily Chart of Intercontinental Exchange, Inc. (ICE) -- Source: TC2000
Daily Chart of Intercontinental Exchange, Inc. (ICE) — Source: TC2000

And here’s how the stock is setting up with my Stealth System:

  • Surge score: 88/100
  • % Above 52-wk low: 25%
  • Sales growth: +18%
  • Triple momentum: yes

Levi Strauss made a fortune selling pick, shovels and denim to hopeful miners in the gold rush of the 1800s.

He found a way to profit without ever making a bet on whether or not he would find gold.

The same thing goes for exchanges like ICE. Futures contracts on crude, gold, natural gas, electricity and agricultural products all trade on the Intercontinental Exchange. And the company gets its fees whether traders win or lose.

We have an opportunity for an early entry on ICE if the stock can break above Thursday’s highs while only risking about 6% on the trade.

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